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attention of the public. 

AMERICAN CHESTERFIELD, or Way to Wealth, Honour, and 
Distinction, being selections from the letters of Lord Chesterfield 
to his Son, and extracts from other eminent authors on the subject 
of Politeness, with alterations and additions suited to the youth of 
the United States. To which is added, Dr Watts' Advice to a 
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library editions of Moore, Scott, Byron and Goldsmith. 
BYRON'S WORKS, complete, in 1 vol. 8vo, with plates, a new, fine, 
and beautiful edition, to correspond with the 8vo iibraiy editions of 
Burns, Moore, Scott and Goldsmith 

BIGLAND'S NATURAL HISTORY OF ANIMALS, col'd plates 

BIGLAND'S NATURAL HISTORY OF BIRDS, col'd plates 
These two works are got up in a very superior style, and well deserve 

an introduction to the shelves of every family library, and every 

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BENNET'S, (Rev. John,) LETTERS TO A YOUNG LADY, on a 
variety of subjects calculated to improve the heart, to form the 
manners, and enlighten the under staii ding. " That our Daughltrs 
may be as polished corners of the Temple." 
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Baker's Livy, 6 vols, 8vo 

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Blair's Sermons, 8vo 

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Beattie on Truth, 12mo 

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Brown's Philosophy of the Human Mind, 2 vols Svo 

Brown's Dictionary of the Bible, Svo 

British Spy. By Wirt, 18mo 

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Bell's (Dr John) Observations on Italy, 12mo 

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Baron Munchausen, 18mo 

Bickersteth on Prayer, 12mo 

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Miscellaneous Catalogue. 3 

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CARPENTER'S NEW GUIDE : Being a complete Book of Lines for 
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tical information was combined with profound theoretical knowledge ; 
thus while his daily experience made the wants of his brother mechan- 
ics familiar to him, his scientific acquirements enabled him to supply 
these wants in a manner which no former Author had ever attempted. 
Fortunately for society, Mr Nicholson felt his own strength ; and feel- 
ing this, he determined to rescue Carpentry from the blundering hands 
of presuming incapacity, and to establish it upon infallible principles : 
upon principles which have ever existed, and which must necessarily 
continue to exist, because they are founded on immutable relations. 
This first effort of our Author was eminently successful ; it superseded 
on its appearance all existing works on the subject, and has for thirty- 
two years, through repeated editions, retained its original celebrity. 
CHITTY ON CONTRACTS. A New and Practical Treatise on the 
Law of Contracts not under Seal, and upon the usual defences to 
Actions thereon. With Corrections and Additional References, by 
a Member of the Massachusetts Bar, in 1 vol. 8vo 
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Cases of Conscience. By Pike and Hayward, 12mo 
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Christian Charity. By J. H. James, 12mo 
Cruden's Concordance, 1 vol. imperial 8vo, new edition 
Cook on Mustard Seed, l8mo 
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Conquest of Granada, 2 vols, 12mo. By W. Irving 
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Combe on the Constitution of Man, 12mo 
Charles the Twelfth. By Voltaire, 12mo 
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Chapone's Works, 2 vols, ISmo 
Christian Orator, ISmo • 

Calvin's Life. By M'Kenzie, ISmo 
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Campbell's Four Gospels 

Clarendon's History of the Rebellion, 6 vols, Svo 
Doddridge on Regeneration, 12rao 
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Domestic Cookery. By an American Lady, ISmo 
Dry den's Virgil, 2 vols, 18mo 
Don Quixotte, 4 vols, 18mo 

Diversions of Purley. By J. Home Tooke, A.M., 2 vols, Svo 
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Declaration of Independence. The Complete Biography of the Signers 
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Dunallan. By the Author of Decision, 2 vols, ISmo 
Death's Doings, 2 vols, plates, Svo 
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Davies's Sermons, 3 vols, Svo 

De Reidsel's Letters Relating to the American Revolution, 12mo • 
Dun's Account of Guatemala, Svo 

Devereux, and the Disowned. By the Author of Pelham, 12rao 
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Drew on the Soul, 12mo 
Dupuy's Hymns for the Baptists, ISrao 
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Duane's Hand-Book for Riflemen, Svo 
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Miscellaneous Catalogue. 5 

Destruction of Jerusalem, 18mo 

Dictionary of Merchandise, 8vo 

Don Juan. By Lord Byron, 2 vols 18mo, and 1 vol. 8vo 

Diversions of Holycott, 1 vol. ISmo 

Davy's Agricultural Chemistry, 12mo 

Evangelical Catechisms, various kinds . 

Ely on the Mind, 12mo 

Edgeworth's Moral Tales, 3 vols 18mo 

Edgeworth's Parent's Assistant, 2 vols ISmo 

Evenings at Home for Young Persons. By Mrs Barbauld and Dr Ai- 
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Elizabeth, or the Exiles of Siberia, 18mo 

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Elia, in 2 vols, ISmo 

Epistolary Guide, 12mo 

Erskine on Freeness of the Gospel, ISmo 

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Extracts from the Bible, being a Collection of the Beauties, Promises 
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Eaton's Abridgement of Milner's Church History, 12mo 

Emerson's Letters from the JEgestn, Svo 

Eulogies on Adams and Jefferson, Svo 

Encyclopedia Americana, Svo 

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the Psalms, Concordance, &c. &c. with plates, 4to 

Farmer's Assistant, Svo 

Federalist, on the New Constitution, Svo 

Ferguson's History of Civil Society, Svo 

Franklin's Life, written by himself, 18mo 

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assistant to the young and inexperienced. 

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Flavel's Saint Indeed, 12mo 

Flavel on the Heart, ISmo 

Flavel's Touchstone of Sincerity, ISmo 

Family Monitor. By J. A. James, 12mo 

Ferguson's Roman Republic, 1 vol. 8vo 

Foxe's Book of Martyrs, 4to, with plates 

Feimel, Life of, 8vo 

Forget Me Nots, 18mo 

Fairy Tales, ISmo 

Flowers of Poetry, ISmo 

Fairfield's New Poems, ISmo . 

Flint's Travels, Svo 

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Faber's Difficulties of Infidelity, 12mo 

Fuller's Calvinistic and Socinian Systems, 12mo 

Flute Melodies, 4to, stitched 

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Fifer's Companion, 4to, do. 

Fair Maid of Perth. By Walter Scott, 2 vols, 12mo 

Franklin's Second Expedition to the Polar Sea, 8vo 

Father Clement, ISmo 

Frey's Hebrew Grammar, Svo 
Penning on the Globes, 12mo 



6 John Grigg's 

GOLDSMITH'S POETICAL AND MISCELLANEOUS WORKS, 

complete in 1 vol. 8vo, fine Library edition, to correspond with the 
8vo edition of Byron, Burns, Moore and Scott. 
GRIMSHAW'S HISTORY OF THE UNITED STATES, with Key 

and Questions, for Schools and Families 
GRIMSHAW'S HISTORY OF ENGLAND, with Key and Questions 
GRIMSHAW'S IMPROVED EDITION OF GOLDSMITH'S HIS- 
TORY OF ROME, with Key and Questions, for Schools and Fami- 
lies 
GRIMSHAW'S IMPROVED EDITION OF GOLDSMITH'S HIS- 
TORY OF GREECE, with Key and Questions, for Schools and 
Families 
The Editor of the North American Review, speaking of these His- 
tories, observes, 

" Among the Elementary Books of American History, we do not re- 
member to have seen any one more deserving approbation than ' Mr 
Grimshaw's History of the United States,' embracing tire period from 
the first settlement of the colonies, to the year 1821. It is a small 
volume, and a great deal of matter is brought into a narrow space; — but 
the author has succeeded so well in the construction of his periods, and 
the arrangement of his materials, that perspicuity is rarely sacrificed to 
brevity. 

" The chain of narrative is skilfully preserved, p.nd the Author's re- 
flections are frequently such as make the facts more impressive, and lead 
the youthful mind to observe causes and consequences, which might 
otherwise have been overlooked. Asa School Book it may justly be 
recommended. 

" What has been said of this volume will apply generally to his other 
historical works. They are each nearly of the same size as the one just 
noticed, and designed for the same object, that is, the use of Classes in 
Schools. 

" The ' History of England' is an original composition, but the Gre- 
cian and Roman Histories are Goldsmith's, improved by MrGrimshaw, 
in which he has corrected the typographical errors, with which the later 
editions of Goldsmith's Abridgements so much abound ; and removed 
any grossness iii language, which, in some few instances, rendered these 
valuable compends less useful in the Schools to which Youth of both 
sexes rci-ort. He has also added a vocabulaxy of proper Names accent 
tuated, in order to show their right pronunciation, which is a valuable 
appendage to the History. 

" All these Books are accompanied with very full and well digested 
Tables of Questions, .for the benefit of Pupils, and also with Keys to the 
same, for the convenience of Teachers." 

GRIMSHAW'S LADIES' LEXICON, and Parlour Companion, con- 
taining nearly every word in the English language, and exhibit- 
ing the plurals of nouns and the participles of verbs, being also 
particularly adapted to the use of Academies and Schools. By 
William Grimshaw, Esq., Author of the Gentlemen's Lexicon, Jkc 
Among the numerous flattering notices of this valuable work are the 
following: 

" The public are indebted to the talents of Mr Grimshaw tor another 
useful book, which he has called the ' Ladies' Lexicon,' thcfugh by the 
by it might without injustice be dedicated to the majority of gentlemen. 
The peculiarity and advantages of the work may be collected from the 
following portion of the preface. ' It differs from every preceding work 
of the kind in this, that it exhibits the plurals of all nouns which are not 
formed by the mere addition of the letter S and also the participles of 
every verb now generally used, and unless accompanied by a particular 
caution, no word has been admitted which is not now of polite or popu- 
lar use, and no word has been excluded which is required either m 
epistolary composition or conversation.' " 

In the Nashville Republican of the 20th ult. we observe the following 
notice of this very useful hook: 

"We found on our table the other day the ' Ladies' Lexicon, by 
William Grimshaw, author of a History of the United States, England, 
&c. &;c. A brief examination of the contents of this highly useful little 
volume, has by no means tended to impair the favourable opinion which 
the flattering testimony borne in its behalf by our editorial brethren ot 
the eastern cities had led us to form. The difficulty that is often expe- 
rienced, even by persons who have received a liberal education, m the 
use of the plurals of nouns and the participles of verbs, must be familiar 
to every one. Whether the final e is to be retained or not in the present 
participle, and how the plurals in a numerous class of nouns should be 



Miscellaneous Catalogue. 7 

formed, are questions of every day occurrence, except in the case of a 
practised writer, for which the dictionaries heretofore in use afford no 
solution. In recommending the ' Ladies' Lexicon,' therefore, to all our 
readers, male and female, who have ever experienced the difficulties 
which it is so admirably calculated to remedy, we but do an ordinary 
act of justice to the author and publisher. We consider the 'Ladies' 
Lexicon,' and commend it to our readers, as a work that possesses supe- 
rior claims on their attention and patronage." 

In giving the above extract, we take occasion to say that teachers 
"will find the ' Ladies' Lexicon' a work admirably adapted to take the 
place, with advantage to their pupils, of the different works recently put 
into their hands under the name of expositors, 8ic. 

" Mr Grimshaw's happy talent at condensing facts and presenting the 
important parts of history in relief, has given his histories a decided 
Ijreference as class books in our schools. His Histories of Greece, of 
Kome, of England, and the United States, are among the happiest spe- 
cimens of text books for a school, and will at once create a demand for 
those most useful books the Ladies' and Gentlemen's Lexicons." 
THE GENTLEiMEN'S LEXICON, or Pocket Dictionary, containing 
nearly every word in the English Language, and exhibiting the plu- 
rals of nouns and the participles of verbs; being also particularly 
adapted to the use of Academies and Schools. By William Grim- 
shaw, Author of the Ladies' Lexicon, History of England, of the 
United States, &c. 
The remarks and recommendations appended to Grimshaw's Ladies' 
Lexicon (immediately preceding) apply with equal force to Grimshaw's 
Gentlemen's Lexicon, and the publisher asserts, without fear of contra- 
diction, that no work of the kind ever published in this country, will be 
found as useful for the purposes of correct epistolary composition, &:c. 
GRIGG'S SOUTHERN AND WESTERN SONGSl'ER: being a 
Choice Collection of the most Fashionable Songs, many of which 
are Original, in'l vol. 18mo 
Numerous flattering notices of this work have appeared from time to . 
time, in the different newspapers throughout our country ; the following 
is from the pen of William Leggett, Esq. former editor of "The Ci'i- 
tic," a gentleman highly distinguished for his literary attainments. 

"A handsome copy of this very popular collection of melodies is lying 
on our table. It diffei's from song books generally, as much in the taste 
and judgment which have been displayed in the selections, as In the neat 
style of its typography and binding. There is scarcely a song, old or 
new, admired for any of the qualities which constitute a good one, whe- 
ther for harmony of expression, spirit or tenderness of the thoughts, ap- 
positeness of imageiy, and illustration or smartness of point, that is not 
to be found in this little volume. Besides the numerous productions 
of the master spirits of the old world, it contains many swc;et effusions^ 
from cis-atlantic poets ; and indeed, some of these " native wood notes 
wild," to use the expression of the bard of paradise, are well entitled to 
a place even in a work which contains the melodious numbers of Camp- 
bell, Moore and Byron. In this last edition of the Southern and W'^est- 
ern Songster, the Editor has availed himself of the enlargement of the 
size of the volume to introduce the admired songs of the distinguished 
vocalists Mrs Knight, Miss Kelly, the Miss Gillinghams, Miss Clara 
Eisher, Miss Rock and others. The extensive and rapid sale which 
the previous editions of this Songster met with, has rendered its charac- 
ter so well known, that it can scarcely require commendations ; but if 
any of our readers are in want of an extensive, judicious and neat collec- 
tion of Melodies, we can cheerfully recommend the volume before us, 
as combining all those qualities." 
Greene's Life. By Judge Johnson, 2 vols, 4to 
Gil Bias, by T. Smollet, 3 vols, 12mo 
Gibbon's History of the Decline and Fall of the Roman Empire, new 

edition, in 4 and 6 volSj 8vo 
Gillies' History of Ancient Greece, complete, in 1 vol. 8vo 
Goldsmith's Histories of Rome and Greece improved by Grimshaw 
Goldsmith's Viear of Wakefield, 18mo 
Golden Treasury, 18mo 

Gray's Mediatorial Reign of the Son of God, 8vo 
Gibson's Surveying, 8vo 
Goldsmith's Animated Nature, 5 vols, 8vo 
Goldsmith's View of the World, 12mo 
Good's Book of Nature, 8vo 
Graham's Isabella's Life, 12mo 



8 John Grigg^s 

Guide to Domestic Happiness, 18mo 

Good's Memoirs. By Olynthus Gregory, 12mo 

Gregory's Letters on the Christian Religion, 2 vols, 12mo 

Garnet's Lectures on Female Education, 18mo 

Gulliver's Travels, 32mo 

Gebel Teir or Mountain of Birds, 12mo 

Garland of Flora, 8vo 

Godman's Natural History, in 3 vols, 8vo 

Gould's System of Short Hand, 18mo 

Galaxy of Wit, 18mo 

Geographical Present, with coloured engravings, 18mo 

Goldsmith's Natural History, with plates, 12rao 

German Testaments, 12mo 

Gordon's Historj"- of Pennsylvania, 8vo 

Grocers' and Distillers' Guide, 12mo 

HITCHCOCK'S POPULAR SYSTEM OF BOOK KEEPING 

HIND'S VETERINARY SURGEON, or Farriery taught on anew and 
easy plan, being a treatise on all the diseases and accidents to which 
the Horse is liable ; the causes and symptoms of each, and the 
most approved remedies employed for the cure in every case ; with 
instructions to the Shoeing Smith, Farrier and Groom, how to ac- 
quire knowledge in the art of Farriery and the Prevention of Dis- 
eases : preceded by a popular description of the animal functions in 
health, and showing the principles on which these are to be restored 
when disordered. By John Hind, Veterinary Surgeon. With con- 
siderable additions and improvements, adapted particularly to this 
country, by Thomas M. Smith, Veterinary Surgeon, and member 
of the London Veterinary Medical Society, in 1 vol. 12mo 
This work is considered by all who are intimately acquainted with 

the various works oi) Farriery to be one of the best Practical Works in 

use ; and the Publisher hopes that all who are aware of the great value 

of one of the noblest and most useful of all animals, will avail themselves 

of the present opportunity for information. 

Hervey's Meditations, 18mo 

Hieroglyphical Bibles, 18mo 

History of England. By Hume, Smollett, and Bissett, 9 vols, new ed. 

Hannah More's Works, complete, 2 vols, 8vo 

Homer's Iliad, translated by Pope, 2 vols, 18mo 

Homer's Odyssey, translated by Pope, 18mo 

Hill's Village Dialogues, 3 vols, 12mo 

Home's Introduction to the Study of the Scriptures, 4 vols, 8vo 

Hastings on Musical Taste, 8vo 

Hall on Terms of Communion, 18mo 

Hudibras by Butler, 24mo 

History of North Carolina, 2 vols, 8vo 

Hopkins' System of Divinity, 2 vols, 8vo 

Hannam's Pulpit Assistant, 3 vols, 18mo 

Hemans' Poems, 2 vols, 18mo 

Henry on Prayer, 12mo 

House Servant's Directory, 12mo 

Hawe's Lectures to Young Men, l8mo 

Hebrew Bible. By Vander Hooght, with points, 2 vols, 8vo 

Howe's History of Greece, 8vo 

Henry's Commentary on the Scriptures, 6 vols, super royal 8vo 

Heber's, (Bishop) Hymns, 12mo 

Heber's Sermons, 8vo and 12mo 

Heber's Life in India, 18mo 

Heber's Travels, 2 vols, 12mo 

Heber's Poems, 18mo 

Heeren's Ancient History, 8vo 

Hall's Voyage to the Eastern Seas, 18mo 

Hall's Travels in America, 2 vols, 12mo 

Humphrey Clinker. By Dr Smollett, 2 vols, 18mo 

Hunter's Sacred Biography, in 3 vols, 8vo 

Holy War, fine edition, with plates, 12mo 

Humphrey's Essays on the Sabbath, 18mo 

Hazlitt's Lectures of the British Senate, 2 vols, 8vo 

Hoyle's Games, 24mo 

Huntingdon's Penmanship 

Harmony of the Four Gospels, 12mo 

Hymns of Zion, &c. for the Baptists, .32mo 



Miscellaneous Catalogue. 9 

JOSEPHUS', (FLAVIUS) WORKS, the learned and authentic Jewish 

historian, and celebrated warrior; containing twenty books of the 

Jewish antiquities, seven books of the Jewish war, and the life of 

Josephns, written by liiraself, translated from the original Greek, 

■ according to Havercamp's accurate edition ; together with explana- 

• tory notes and observations. Embellished Avith elegant engravings. 
By the late William Whiston, A. M. from the last London edition, 
complete in 2 vols, 8vo. Grigg's Elegant Stereotype Edition. 
AH those who wish to possess a beautiful and correct copy of this in- 
valuable work, would do well to purchase this edition. It is for sale at 
all the principal book stores in the United States, by country merchants 
generally in the Southern and Western States, and at a very low price 
JONES', (DR THOMAS P.) Improved Edition of Mrs B.'s Conversa- 
tions on Natui-al Philosophy, with questions 
The correction of all the errors in the body of this work renders this 
edition superior to any other. 
Irving's (Kev. Edward) Orations, 8vo 
Jay's Family Prayers, 18mo 
Johnson's Lives of the Poets, 3 vols, 12mo 

Junius's Letters, 2 vol*, 18mo 

Jefferson's Notes on Virginia, 12mo , . 

Jefferson's Manual of Parliamentary Practice, l2mo 

Johnson's Pocket Dictionary, 18mo 

Jenks' Devotions, 12mo 

Johnson's Works, complete, 6 vols, 8vp 

Jahn's Ai'chKology, 8vo 

Jahn's Hebrew Commonwealth, 8vo 

Jahn's Introduction to the Old Testament, 8vo 

Johnson's English Dictionary, as improved by Todd, 8vo 

Irving's Life of Columbus, l2mo and 8vo 

Johnson's Lectures on Human Knowledge, 8vo 

Jowet's Researches in the Holy Land-, 12ri«o 

Joseph Andrews. By Fielding, ISmo 

Indian Wars, 12mo 

Jeram on Infant Baptism, 18mo 

Kames's Elements of Criticism, 8vo 

Kent's (Chancellor) Commentaries, 3 vols, 8vo 

Kirk White's Remains, 2 vols, 18mo 

Keppel's Travels, Svo 

Knickerbocker's History of New York. By W. Irving, 2 vols, 12mo 

King's Collection of Pamphlets, of 40 kinds 

KoUock's Sermons, 4 vols, Svo 

Life of General Marion. By Weems, 12mo 

Life of General Washington. By Weems, 12mo ( 

Law on Christian, Perlection, l2mo 

Lacon, or Many Things in Few Words, 2 vols, 18mo 

Lempriere's Classical Dictionary, 8vo 

Law's Serious Call to a Devout and Holy Life, 12mo 

Locke's Essays on the Human Understanding, Svo 

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Letter Writers, various editions 

Lady of the Lake, a Poem. By Walter Scott, 18mo 

Lights and Shadows of Scottish Life, ISmo 

Lee's Campaigns in the Carolinas, Svo 

Life of Paul Jones, Svo 

Life and Remains of Dr E. D. Clark, Svo 

Lady of the Manor, 7 vols, ISmo 

Lalla Rookh, a poem. By T. Moore, 18mo 

Legendary, a Series of Tales, in 2 vols, 12rao 

Lingard's History of England, 10 vols, Svo 

Life of Patrick Henry, Svo 

Lafayette's Travels in the United States, 2 vols, 12mo 

Lempriere's Biographical Dictionary, Svo 

Looking Glass for the Mind, 18mo 

Lewis's Elements of Chess, 12mo 

Life and Adventures of A. Clenning. By T.- Flint, 2 vols, 12mo 

Life of Pinckney, Svo 

Lowe's Present State of England, Svo 

Life of Gardiner, 18mo 

Life of General Jackson, 18mo 

Life of Lindley Murray, Svo 

.Lacy''3 Principles of Elocution, 12mo 
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Lowth's Lectures on Hebrew Poetry, 8vo 

Life of Henry Longden, 18mo 

Life of Joseph, 18mo 

Laconics, or the best Words and Sayings of the best Authors, in 3 vols, 

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Mason's Spiritual Treasury, 2 vols, Svo 
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Moron, a Tale of the Alharabra, a New Poetical Work, 12mo 

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NEW song" BOOK. Grigg's Southern and Western Songster : being 

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New Hymns of the Episcopal Church, various sizes 
Neuraan's and Barretli's Spanish Dictionary, 2 vols, 8vo 
Nott on Intemperaiice, 18rao 

Napoleon's Life. By Sir Walter Scott, various editions 
Notions of the Americans, or the Travelling Bachelor, in 2 vols, ISmo, 

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Nicholson's Operative Mechanic, in 2 vols, 8vo 
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Newton's Hymns, 12mo 
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National Orator, 12mo 
New Brunswick Collection of Sacred Music 
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Our Village Sketches. By Miss Mitford, 3 vols, ISmo 
Old Bachelor. By Wirt, 2 vols, 18mo 
Ourika, a Tale from the French, 18mo 

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Ovid's Art of Love, 18mo. Ossian's Poems, 2 vols, 18mo 
Orator's Guide, 12mo 
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POETICAL QUOTATIONS, being a Complete Dictionary of the most 
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which we have seen. A regular perusal of it would enrich ajiy mind." 
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Penn's (William) Life. By Mrs Hughs, 12mo 
Pascal's Provincial Letters, 12mo 
Pollock's Course of Time, a Poem, in 10 Books, 18mo 
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Payson's Sermons, 1 Vol. 8vo ■ \ 

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Kambler, by Dr Johnson, 8 vols — 4 vols 18mo 

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Rise and Progress of Religion. By Dr Doddridge, 12nao 
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SAY'S POl^lTICAL ECONOMY. A Treatise on Political iEconomy, 
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"A fourth and very neat edition (octavo, two volumes in one,) of 
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appeared in this city. This work has been introduced as a text book 
in Harvard University, Brown University, Yale College, Augusta Col- 
lege, Kenyon College, Transylvania University, Dickinson College, 
Oxford College, Stc. It has been adapted in like manner in most of tiie 
principal Universities on the continent of Europe. The American edi- 
tor, who is extensively versed in Political Economy^, pronounces it to 
be the most methodical, comprehensive, and best digested treatise on 
that science which has yet been presented to the world. It is certainly 
the best for the use of students, as a manual, and desei-ves the credit of 
superiority in method and accuracy." 

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Miscellaneous Catalogue. 13 

the reader to the right channel of inquiry: this is what is required: and 
was the value of the work before us generally known, we venture to say 
that every man wlio felt an interest in prosecuting the momentous in- 
quiry, would possess himself of a work which is capable of giving such 
just and satisfactory responses. 

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from the force of its arguments, and the general facility of its deduc- 
tions, be instrumental in imparting a proper knowledge to well meant 
zeal. 

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give clear and rational views of a subject, which, without some such 
aid, is usually involved in mystery, or seen with the distorted vision of 
interest." 

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this young and rising republic, that the laws regulating the internal 
policy of the country should be the result of great political v. isdom. A 
nation can easily recover from a disastrous and destructive war, either 
external or internal, provided it be well governed at home ; but every 
page of history points to us the disastrous and blighting effects resulting 
from an ignorant application of its internal resources. A government, 
to be wise, must adapt itself to the times; and as these are perpetually 
changing, it is necessary that its acts should keep pace with such changes, 
or it must sooner or later fall in the rear of improvement, and its pros- 
perity be laid prostrate." 

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Townsend's Abridgement of Milner, Svo 

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Miscellaneous Catalogue. 15 

Tales of a Grandfather, 1st and 2nd Series, in 4 vols, ISmo. By Sir 

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nius, exquisite feeling, fine invention, the most harmonious metre, and the hap- 
piest diction, are at all valued." 

JOHN GRIGG has also in press Goldsmith's Poetical and 
Prose Works, (Washington Irving's Edition), in 1 vol. 8vo. 

In thus publishing the works of the most celebrated British Clas- 
sics and Poets, J. Grigg has in view to facilitate their acquisition by 
reducing them to a compact form, offering them at a low price, and 
avoiding a heavy expense in binding, thus rendering them portable 
to the Traveller and available to the Economist. From the atten- 
tion bestowed on the execution of these editions ; they are, in all 
respects, worthy of a distinguished place in every Public and Pri- 
vate Library. 

J. G. will from time to time continue to publish works on the 
same cheap and elegant plan. 



A TREATISE 



ox 



POLITICAL ECONOMY. 



TREATISE 

ON 

POLITICAL ECONOMY; 

OR THE 

PRODUCTION, DISTRIBUTION AND CONSUMPTION 

OF 

IVEALTH. 

BY JEAJf-BAPTISTE SAY. 



TRANSLATED FROM THE FOURTH EDITION OF THE FRENCH, 

BY C. R. PRINSEP, M. A. 

WITH NOTES BY THE TRANSLATOR. 



iFourtlv American SSUttfon. 

CONTAINING 
A TRANSLATION OF THE INTRODUCTION, AND ADDITIONAL NOTES, 

B¥ CLEMENT C. BIDDLE, 

MEMBER OF THE AMERICAN PHILOSOPHICAL SOCIETY. 



IPJitlatrdijfiCa: 

JOHN GRIGG, No. 9 NORTH FOURTH STREET. 



1830. 

OS 



Eastern District of Pennsylvania, to wit : 

Be it remembered, that on the eleventh day of May, A. D. 1827, in the 
fifth-first year of the Independence of the United States of America, John 
Grigg-, of the said district, has deposited in this office the title of a Book, 
the right whereof he claims as proprietor, in the words following, to wit : — 

" A Treatise on Political Economy ; or the Production, Distribution and 
Consumption of Wealth. By Jean-Baptiste Say. Translated from the fourth 
edition of the French, by C. R. Prinsep, M. A.' With notes by the Trans- 
lator. Second American Edition, Containing a Translation of the Introduc- 
tion, and additional Notes, by Clement C. Biddle, member of the American 
Philosophical Society." 

In conformity to the Act of the Congress of the United States, entitled, 
" An act for the encouragement of learning, by securing the copies of 
maps, charts and books, to the authors and proprietors of such copies, dur- 
ing the times therein mentioned :" and also to an act entitled," " An act 
supplementary to an act, entitled. An act for the encouragement of learn- 
ing, by securing the copies of maps, charts and books, to the authors and 
poprietors of such copies, during the times therein mentioned ; and extend- 
ing the benefits thereof to the arts of designing, engraving, and etching 
historical and other prints." 

D. CALDWELL, 
Clerk of the Eastern District of Pennsylvania. 



William Brown, Printer. 



CONTENTS. 



BOOK I. 

OF THE PRODUCTION OF WEALTH. 

PAGE 

Advertisement by the American Editor - - - ix 

Introduction - - - - - -- - xix 

CHAP. 

I. Of wJhat is meant by the term production - - 1 

II. Of the different kinds of industry, and the mode in 

which they concur in production - - - 3 

III. Of the nature of productive capital, and the mode 

in which it concurs in the business of production 11 

IV. Of the natural agents, that assist in the production 

■ of wealth ; and specially of land - - 14 

V. Of the mode, in which industry, capital, and natu- 

ral agents unite for the purpose of production 18 

VI. Of the operations common to all branches of in- 

dustry alike - - - - - - 20 

VII. Of the labour of mankind, of nature, and of ma- 

chinery respectively - - - - - 26 

VIII. Of the advantages and disadvantages resulting 

from the division of labour ; and of the extent 

to which it may be carried - - - - 32 

IX. Of the different methods of employing commer- 

cial industry ; and the mode in which they con- 
cur in production . - - . . 41 

X. Of the transformations undergone by capital, in 

the progress of production - - - - 48 

XI. Of the formation and multiplication of capital - 51 

XII. Of unproductive capital ----- 62 

XIII. Of immaterial products, or values consumed at the 

moment of production 63 

XIV. Of the right of property ----- 72 

XV. Of the vent or demand for products - - - 76 

XVI. Of the benefits, resulting from the brisk circula- 

tion of money or commodities - - - 85 



CONTENTS. 



PAGE 



XVII. Of the effect of government-regulations, intended 

to influence production - - - - 87 

Sect. 1. Effect of regulations prescribing the na- 
ture of the products - . - 88 
Digression — Upon what is called the ba- 
lance of trade _ . _ . 93 

2. Of the effect of regulations, fixing the 

manner of production - - - 120 

3. Of privileged trading companies - - 129 

4. Of regulations affecting the corn trade 134 

XVIII. Of the effect upon national wealth, resulting from 

the productive efforts of public authority 144 

XIX. Of colonies and their products - - - - 148 

XX. Of temporary and permanent emigration, consi- 

dered in reference to national wealth - - 160 
XXL Of the nature and uses of money 

Sect. 1. General remarks - - - - 164 

2. Of the material of money - - - 168 

3. Of the accession of value a commodity 

receives, by being vested with the cha- 
racter of money - - - - 171 

4. Of the utility of coinage ; and of the 

charge of its execution - - - 176 

5. Of alterations of the standard of money 182 

6. Of the reason why money is neither a 

sign nor a measure _ - . 188 

7. Of a particularity, that should be attend- 

ed to, in estimating the sums mention- 
ed in history - - - - - 196 

8. Of the absence of any fixed ratio of value, 

between one metal and another - 202 

9. Of money as it ought to be - - 204 

10. Of copper and brass metal coinage - 209 

11. Of the preferable form of coined money ^ 211 

12. Of the party, on whom the loss of coin 

by wear should properly fall - - 212 
XXII. Of signs or representatives of money 

Sect. 1. Of bills of exchange and letters of credit 214 

2. Of banks of deposite - - - 217 

3. Of banks of circulation or discount ; and 

of bank notes, or convertible paper - 219 

4. Of paper money - - - - 230 



CONTENTS. Vll 



BOOK II. 

OF THE DISTRIBUTION OF WEALTH. 

PAGE 

I. Of the basis of value, and of supply and demand 235 

II. Of the sources of revenue - - - - 244 

III. Of real and relative variation of price - - - 250 

IV. Of nominal variation of price, and of the peculiar 

value of bullion and of coin - - - - 259 

V. Of the manner, in which revenue is distributed 

amongst society - - - - - - 267 

VI. Of what branches of production yield the most libe- 

ral recompense to productive agency - - 275 

VII. Of the revenue of industry 

Sect. 1. Of the profits of industry in general - 278 

2. Of the profits of the man of science - 283 

3. Of the profits of the master-agent or ad- 

venturer in industry . - - - 284 

4. Of the profits of the operative labourer - 287 

5. Of the independence accruing to the mo- 

derns from the advancement of industry 296 

VIII. Of the revenue of capital - - -• - - 298 
Sect. 1. Of loan at interest - - - - 299 

2. Of the profit of capital - - - - 311 

3. Of the employments of capital most bene- 

ficial to society - - - - 313 

IX. Of the revenue of land : 

Sect. 1. Of the profit of landed property - - 316 
. 2. Ofrent 322 

X. Of the effect of revenue derived by one nation from 

another .-.-.-- 325 

XI. Of the mode, in which the quantity of the product 

affects population: . . 

Sect. 1. Of population, as connected with political 

economy ----- 329 

2. Of the influence of the quality of a nation- 
al product upon the local distribution of 
the population - - - - * ^40 



Vm CONTENTS. 



BOOK III. 

OF THE CONSUMPTION OF WEALTH. 

PAGE 

I. Of the different kinds of consumption - - 347 

n. Of the effect of consumption in general - - 351 

ni. Of the effect of productive consumption - - 354 

IV. Of the effect of unproductive consumption in gene- 

ral - - 357 

V. Of individual consumption, its motives and its ef- 

fects - - - 362 

VI. Of public consumption: 

Sect. 1 . Of the nature and general effect of pubhc 

consumption ----- 373 
2. Of the principal objects of national expen- 
diture 383 

Of the charge of civil and judicial admi- 
nistration ----- 384 

Of charges, niilitary and naval - - 389 
Of the charges of public instruction - 393 

Of the charges of public benevolent insti- 
tutions ------ 400 

Of the charges of public edifices and works 403 

VII. Of the actual contributors to public consumption 406 

VIII. Of taxation: 

Sect. 1. Of the effect of all kinds of taxation in ge- 
neral - . \ _ . . _ 408 

2. Of the different modes of assessment, and 

the classes they press upon respectively 423 

3. Of taxation in kind - "- - - 438 

4. Of the territorial or land land-tax of Eng- 

land - 440 

IX. Of national debt; 

Sect. 1. Of the contracting of debt by national au- 
thority, and of its general effect - - 442 
2. Of public credit, its basis, and the circum- 
stances that endanger its solidity - 447 



A D V E II Tl S E M E N T 
Bs tlie American ISUtov, 



No work upon political economy, since the publication of 
Dr. Adam Smith's profound and original Inquiry into the Nature 
and Causes of the Wealth of Nations, has attracted such general 
attention, and received such distinguished marks of approbation 
from competent judges, as the " Traite D'Economie Politique" 
of M. Say. It was first printed in Paris in the year 1803; and, 
subsequently, has passed through five large editions, that have 
received various corrections and improvements from the author. 
Translations of the work have been made into the German, 
Spanish, Italian, and other languages; and it has been adopted 
as a text-book in all the universities of the continent of Europe, 
in which this new but essential branch of liberal education is 
now taught. The three former American editions of this trans- 
lation have also been introduced into several of the most re- 
spectable of our own seminaries of learning. 

It is unquestionably the most methodical, comprehensive, and 
best digested treatise on the elements of political economy, that 
has j^et been presented to the world. It exhibits a clear and 
systematical view of all the solid and important doctrines of 
this very extensive and difficult science, unfolded in their pro- 
per order and connexion. In the establishment of his principles, 
the author's reasonings, with but few exceptions, are logical and 
accurate, delivered with distinctness and perspicuity, and always 
supported by the fullest and most satisfactory illustrations. A 
rigid adherence to the inductive method of investigation, in the 

2 



X ADVERTISEMENT. 

prosecution of almost every part of his inquiry, has enabled 
M. Say to ejSect a nearly complete analysis of the numerous 
and complicated phenomena of wealth, and to enunciate and 
establish, with all the evidence of demonstration, the simple and 
general laws on which its production, distribution, and con- 
sumption depend. The few slight and inconsiderable errors 
into which the author has fallen do not affect the general sound- 
ness and consistency of his text, although, it is true, they are 
blemishes that disfigure it. But these are of rare occurrence, 
and the false conclusions involved in them may be easily de- 
tected and refuted by recurrence to the fundamental principles 
of the work, with which they are manifestly at variance, and 
contradict. 

The foundation of the science of political economy was firm- 
ly laid, and the only successful method of conducting our in- 
quiries in it pointed out and exemplified by the illustrious author 
of the Wealth of Nations ; and a number of its leading doctrines 
were developed and explained by other eminent writers on the 
continent of Europe, who, about the same time, were engaged 
in investigating the nature and causes of social wealth. But 
neither the scientific genius and penetrating sagacity of the for- 
mer, nor the profound acuteness and extensive research of 
many of the latter, enabled them to obtain a complete discovery 
of all the actual phenomena of wealth, and thus to effect an en- 
tire solution of the most difficult and abstruse problems of the 
science; those, namely, which establish the true theor}^ of va- 
lue and unfold the real sources of production. Aided, how- 
ever, by the valuable labours of, and the materials collected by 
his distinguished predecessors, and proceeding in the same path, 
M. Say, with a closeness and minuteness of attention due to so 
important a study, has succeeded in examining, under all their 
aspects, the general facts which the ground-work of this science 
presents, and by rejecting and excluding the accidental circum- 
stances connected with them, has traced up its ultimate laws 
or principles. 

Accordingly, the author of this treatise, by pursuing the in- 
ductive method of investigation has, in the most strict and phi- 
losophical manner, demonstrated the true nature of value, de- 



ADVERTISEMENT. XI 

duced its origin, and presented a clear and accurate explanation 
of its theory. His definition of wealth, therefore, is more pre- 
cise and correct than that of any of his predecessors in this in- 
quiry. The operation of human industry, which Dr. Adam 
Smith, not with the strictest propriety, denominates labour, the 
important agency of natural powers and especially land, the 
functions of capital, and the relative services of these three in- 
struments, as well as the modes in which they all concur in the 
business of production, were first distinctly and fully pointed 
out and illustrated by our author. In this way he successfully 
unfolded the manner in which production takes place, and im- 
parts value to products, in agriculture, manufactures, and com- 
merce. In distinguishing reproductive from unproductive con- 
sumption, M. Say has exhibited the exact nature of capital and 
consequent important agency in production, and thence has 
shown why economy is a source of national wealth. Such are 
this author's peculiar and original speculations, the fruits of deep 
and patient meditation on the phenomena observed. The ele- 
mentary principles derived from them, with others previously 
ascertained, he has combined into one harmonious, consistent, 
and beautiful system. 

But some of these solid and well-established positions have 
been criticised and objected to as inconclusive and inadmissible, 
by Mr. Ricardo and by Mr. Malthns, two of the ablest and 
most distinguished political economists among our author's con- 
temporaries. Other doctrines in relation to the nature and ori- 
gin of value have been advanced by them, and with so much 
plausibility too, that some acute reasoners of the present day 
have not been sufficiently on their guard against the fallacies in- 
volved in them. The mathematical cast given to their reason- 
ings by these writers, has captivated and led astray the under- 
standings of intelligent and sagacious readers, and induced them 
to adopt, as scientific truths, what, when properly investigated 
and analysed, are found to be merely specious hypotheses. 
Hence it is that a theory of value, purely gratuitous, has been 
extolled in one of the principal literary journals of Great Bri- 
tain, as being " no less logical and conclusive than it was pro- 
found and important." Our author accordingly deemed it ne- 



Xll ADVERTISEMENT. 

cessary to examine the arguments brought forward in support 
of these views of his opponents, in order to test their soundness 
and accuracy, and to submit his own principles to a further re- 
view, that he might become satisfied that the conclusions he 
had deduced from them had not been in any manner invali- 
dated. 

In the notes appended by M. Say to the French translation 
of Mr. Ricardo's Principles of Political Economy and Taxation, 
the reader will find what the editor deems a masterly and con- 
clusive refutation of the theoretical errors of this author. M. 
Say's strictures upon the twentieth chapter of the work, enti- 
tled, *' Value and Riches, their Distinctive Properties," are in 
his opinion decisive and unanswerable. The fallacies contained 
in Mr. Ricardo's theory of value, which, the editor thinks, may 
be traced to an anxiety to give consistency to the loose and in- 
accurate assertion of Dr. Adam Smith, that exchangeable value 
is entirely derived from human labour, are there fully exposed, 
and his whole train of reasoning shown to rest upon an unwar- 
rantable assumption. It must, however, be conceded that Mr. 
Ricardo was an intrepid and uncompromising reasoner, who al- 
ways pi'oceeded in the most direct and fearless manner from his 
premises to the conclusion. But not uniting with the strongest 
powers of reasoning, a capacity for analytical subtility, he some- 
times did not perceive verbal ambiguities in the formation of 
his premises, and transitions in the signification of his terms in 
the conduct of his argument, which, in these instances, vitiated 
his conclusions. The fundamental errors into which he has 
fallen, accordingly, do not arise from any want of strictness 
in his deductions, but from undue generalizations and perver- 
sions of language. In M, Say's Letters to Mr. Malthus, which 
have been translated by Mr. Richter, the points at issue be- 
tween these two eminent political economists are discussed in 
the most luminous, impartial, and satisfactory manner ; and by 
all candid and unprejudiced critics must be considered as bring- 
ing the controversy to a close. 

It is not his intention, nor would it be proper on this occa- 
sion, for the editor further to. enter into the merits of the con- 
troversial writings of our author. Any dispassionate inquirer, 



ADVERTISEMENT. 



who will take the pains carefully to review the whole ground 
in dispute, will, he thinks, find that these writings contain a 
triumphant vindication of such of the author's general princi- 
ples as had been assailed by his ingenious opponents. When- 
ever the study of the science of political economy shall be more 
generally cultivated as an essential branch of early education, 
most of the abstruse questions involved in the controversies 
which now divide the writers on this subject will be brought to 
a conclusion ; the accession of useful knowledge it will occa- 
sion will more effectually eradicate the prejudices which have 
given birth to these disputes and misconceptions, than any di- 
rect argumentative refutation. 

The great merits of M. Say's Treatise on Political Economy 
are now well known and highly estimated in Great Britain, by 
that class of speculative readers who take a deep interest in the 
progress of a science, which " aims at the improvement of so- 
ciety," as DuGALD Stewart so truly remarks, '' not by deli- 
neating plans of new constitutions, but by enlightening the po- 
licy of actual legislators j" a science, therefore, with the right 
understanding of whose principles, the welfare and happiness of 
mankind are intimately connected. 

In alluding to this excellent work of M. Say, Mr. Ricardo 
remarks, " that its author not only was the first, or among the 
first, of continental writers, who justly appreciated and applied 
the principles of Smith, and who has done more than all other 
continental writers taken together, to recommend the principles 
of that enlightened and beneficial system to the nations of Eu- 
rope ; but who has succeeded in placing the science in a more 
logical, and more instructive order; and has enriched it by se- 
veral discussions, original, accurate, and profound." 

The English public has for some time been in possession of 
the present excellent translation of this treatise by Mr, Prinsep; 
the first edition of which was published in London in the spring 
of 1821. It is executed with spirit, elegance, and general fideli- 
ty, and is a performance, in every respect, worthy of the origi- 
nal. It is here given to the American reader without any alter- 
ation. 

The translator wasted much ingenuity in various notes which 



XIV ADVERTISEMENT. 

he thought proper to subjoin to the text, in endeavouring to 
overthrow some of the author's elementary principles, which, 
notwithstanding, are as fixed and immutable as the facts which 
constitute their basis. Had Mr. Prinsep more thoroughly stu- 
died M, Say's profound theoretical views on the subject of 
value, and had he, also, made himself acquainted, which it no 
where appears that he has done, with the powerful and success- 
ful defence of these doctrines, contained in the notes on Mr. 
Ricardo's work, and in the letters to Mr. Malthus, already re- 
ferred to, he perhaps might have discovered, that they are the 
ultimate generalizations of facts, which, agreeably to the most 
legitimate rules of philosophising, the author was entitled to lay 
down as general laws or principles. At all events, Mr. Prinsep 
should not have ventured upon an attack on these first princi- 
ples of the science of political economy, without this previous 
examination. 

Such, therefore, of these notes of the English translator as are 
in opposition to the well-established elements of the science, and 
have no other support than the hypothesis of Mr. Ricardo and 
Mr. Malthus, have been entirely omitted ; the editor not deem- 
ing himself under any obligation to give currency to errors, 
which would perpetually interrupt and distract the attention of 
the reader in a most abstruse and difficult inquiry. Other notes 
of the translator, which contain interesting and valuable illustra- 
tions of other general principles of the work, drawn from the 
actual state of Great Britain and her colonies, have been retain- 
ed in this edition, as appropriate and useful. The translator's 
remarks on the pernicious character and tendency of the restric- 
tive and prohibitive policy, are particularly worthy of regard, 
confirming, as they most fully do, on this subject, all the im- 
portant conclusions of the author. The folly of attempting, either 
by extraordinary encouragements, to attract towards some 
branches of production a larger share of capital and industry 
than would naturally be employed in them, or by uncommon 
restraints forcibly to withdraw from others a portion of the capi- 
tal and industry that would otherwise be invested in them, is 
beginning to be better understood. 

The restrictive system, or that which by means of legislative 



ADVERTISEMENT. 



enactments endeavours to give a particular direction to national 
capital and industry, derived its whole support from the assump- 
tion of positions now generally admitted to be gratuitous and 
unfounded, namely, that in trade whatever is gained by one na- 
tion must necessarily be lost by another, that wealth consists 
exclusively of the precious metals, and consequently that in all 
sales of commodities the great object should be to obtain returns 
in gold and silver. In Europe these erroneous opinions have 
now, for some time, been relinquished by political economists 
of all the various schools, some of whom yet differ and dispute 
respecting a few of the more recondite and ultimate elements of 
the science. In the whole range of inquiry in political economy, 
perhaps there is not a single proposition better established, or 
one that has obtained a more universal sanction from its en- 
lightened cultivators in every countr}^, than the liberal doctrine, 
that the most active, general, and profitable employments are 
given to the industry and capital of every people, by allowing 
to their direction and application the most perfect freedom, com- 
patible with the security of property. This fundamental 
position of political economy, and the various principles that 
flow from it as corollaries, were first systematically developed, 
explained, and taught by the great father of the science, Dr. 
Adam Smith ; although glimpses of some of these important 
truths had previously, and about the same time, reached the 
minds of a few eminent individuals in other parts of the world. 
^' The most efiectual plan for advancing a people to greatness," 
says Dr. Smith, " is to maintain that order of things which na- 
ture pointed out; by allowing ever}^ man as long as he observes 
the rules of justice, to pursue his own interest in his own way, 
and to bring both his industry and his capital into the freest 
competition with those of his fellow-citizens." Animated by 
the same desire to promote the improvement and happiness of 
mankind that actuated Dr. Smith, the most profound inquirers 
among his successors embraced his enlarged and benevolent 
views, as the only certain means of augmenting national wealth, 
and eloquently vindicated and enforced them. The doctrine of 
the freedom of trade and industry was adopted and taught by 
Dugald Stewart, Ricardo, Malthus, Torrens, Horner, Huskisson, 



XVI ADVERTISEMENT. 



Lauderdale, Bentham, Mills, Craig, Lowe, Tooke, Senior, and 
M^Culloch, the most distinguished British political economists, 
and on the continent of Europe, by authors as celebrated, name- 
ly. Say, Sismondi, Storch, Gamier, Destutt-Tracy, Ganilh, Jo- 
vellanos, Sartorius, Queypo, Leider, Von Schlozer, Kraus, 
Weber, Muller, and Skarbeck. 

'•' Under a system of perfectly free commerce," says Mr. Ri- 
cardo, " each country naturally devotes its capital and labour to 
such employments as are most beneficial to each. This pursuit 
of individual advantage is admirably connected with the univer- 
sal good of the whole. By stimulating industry, by rewarding 
ingenuity, and by using most efficaciously the powers bestowed 
by nature, it distributes labour most effectively and most economi- 
cally: while by increasing the general mass of productions, it dif- 
fuses general benefit, and binds together by one common tie of 
interest and intercourse, the universal society of nations through- 
out the civilized world. It is this principle which determines 
that wine shall be made in France and Portugal, that corn shall 
be grown in America and Poland, and that hardware and other 
goods shall be manufactured in England." 

Our own celebrated countryman Franklia, too, with a saga- 
city and force which always characterized his intellect, main- 
tained and exemplified in his " Essay on the Principles of 
Trade," what he therein repeatedly called " the great principle 
of freedom in trade." Even before the appearance of the Wealth 
of Nations, he had with almost intuition anticipated some of the 
most profound conclusions of the science of political economy, 
which other inquirers had arrived at only after a patient and la- 
borious analysis of its phenomena. The new and generous com- 
mercial policy is not more beholden for support and currency 
to the arguments and illustrations of any one of its early expo- 
sitors, than to the clear and vigorous pen of the highly gifted 
American philosopher. "The expressions, Laissez nous Jaire, 
and pas trop gouverner," which, to use the language of Du- 
GALD Stewart, the highest of all authorities, *' comprise 
in a few words two of the most important lessons of political 
wisdom, are indebted chiefly for their extensive circulation, to 
the short and luminous comments of Franklin, which had so 



ADVERTISEMENT. 



extraordinary an influence on public opinion, both in the Old 
and New World." Nevertheless, strange as it may seem, by a 
perversion or misconception of a few of his incidental opinions, 
the name of the first of practical statesmen has been invoked, 
and its authority employed among us, in aid of a system of re- 
straints and prohibitions on commerce, which it was the chief 
aim of his jDolitico-economical writings to refute and condemn 
as alike repugnant to sound theory and destructive to national 
prosperity. Whenever American statesmen and legislators shall 
have as clear and steady perceptions as Franklin of the truth 
and wisdom of the doctrine of commercial freedom, we may 
expect that our national and state codes will no longer exhibit 
so many traces of that empirical spirit of tampering regulation 
which, instead of invigorating and quickening the development 
of national wealth, only cramps and retards its natural growth. 
"Where should we expect," says M. Say, in a letter to the 
editor, " sound doctrine to be better received than amongst a 
nation that supports and illustrates the value of free principles, 
by the most striking examples. The old states of Europe are 
cankered with prejudices and bad habits ; it is America who 
will teach them the height of prosperity which may be reached 
when governments follow the counsels of reason and do not cost 
too much." 

The preliminary discourse has been translated by the Ameri- 
can editor, and in this edition of the work is restored to its 
place. The editor must confess that he is at a loss to account 
for the omission by the English translator of so material a part 
of the author's treatise as the introduction to his whole inquiry. 
In itself, it is a performance of uncommon merit, has immediate 
reference to, and sheds much light over, the general views un- 
folded in the body of the work. The nature and object of the 
science of political economy, the only certain method of con- 
ducting any of our inquiries in it with success, and the causes 
which have hitherto so much retarded its advancement, are all 
considered and pointed out with great clearness and ability. 
The author has also connected with it a highly interesting and 
instructive historical sketch of the progress of this science 
during the last and present century, interspersed with numerous 

3 



ADVERTISEMENT. 



judicious and acute criticisms upon the writings and opinions 
of his predecessors. Moreover, this discourse, throughout every 
part, is deeply philosophical, and well calculated to prepare the 
reader for the study on which he is about to enter. The editor 
has, therefore, he trusts, performed an acceptable service in put- 
ting the Antierican student in possession of so important a part 
of the original work.* 

Notes have, also, been subjoined by the American editor, for 
the purpose of marking a few inconsiderable errors and incon- 
sistencies into which the author has inadvertently fallen, and of 
supplying an occasional illustration, drawn from other authors, 
of such passages of the text as seemed to require further eluci- 
dation or correction. 

C. C. B. 

Philadelphia, January) 1830. 

* The following extract of a letter from M. Say, to the American editor, it 
may not be improper to subjoin, as it contains the author's opinion of the value 
he attaches to the preliminary discourse. 

" Your translation and restoration of the preliminary discourse adds, in my 
eyes, a new value to your edition. It could only have been from a narrow cal- 
culation of the English publisher, that it was omitted in Mr. Prinsep's transla- 
tion. Ought tluit portion of the work to be deemed unuseful, whose aim is to 
unfold the real object of the science, to present a rapid sketcli of its history, 
and to point out the only true method of investigating it with success ? Mr. 
George Pryme, professor of political economy in the university of Cambridge, 
in England, makes this very discourse the principal topic of several of his first 
lectures." 



INTRODUCTION". 



A sciBNCE advances with certainty, only when the plan of in- 
quiry, and the objects of our researches, have been clearly de- 
fined ; otherwise, a small number of truths are loosely laid hold 
of, without their connexion being perceived, and numerous er- 
rors, without being enabled to detect their fallacy. 

For a long time the science of politics, confined, in strict- 
ness, to the investigation of the principles which lay the founda- 
tion of the social order, was confounded with political economy, 
which unfolds the manner in which wealth is produced, distri- 
buted and consumed. Wealth, nevertheless, is essentially inde- 
pendent of political organization. Under every form of govern- 
ment, a state, whose affairs are well administered, may prosper. 
Nations have risen to opulence under absolute monarchs, and 
have been ruined by popular councils. If poHtical liberty be 
more favourable to the development of wealth, it is indirectly; in 
the same manner that it is more favourable to general education. 

In confounding in the same researches the essential principles 
of good government with those on which the growth of wealth, 
either public or private, depends, it is by no means surprising that 
authors should have involved these subjects in obscurity, instead 
of elucidating them. Steuart, who has entitled his first chapter 
*' Of the Government of Mankind," is liable to this reproach. 
The sect of " Economists" of the last century, throughout all 
their writings, and J. J. Rousseau in the article " Political Eco- 
nomy" in the Encyclopedic, lie under the same imputation. 

Since the time of Adam Smith it appears to me that these two 
very distinct inquiries have been uniformly separated ; the term 
political economy^ being now confined to the science which 
treats of wealth, and that of politics, to designate the relations 

* From oiKOc, a house, and vo/mo^, a law ; economy, the law which regu- 
lates the household. Household, according to the Greeks, comprehending 
all the goods in possession of the family; and ^oZiiicaZ extending its applica. 
tion to society or the nation at large. 

Political economy is the best expression that can be used to designate 
the science discussed in the following treatise ; which is not the investiga- 
tion of natural wealth, or that which nature supplies us with gratuitously 
and without limitation ; but of social wealth exclusively, which is founded 
on exchange and the recognition of tlie right of property ; both social regu- 
lations. 

4 



XX INTRODUCTION. 

existing between a government and its people, and the rela- 
tions of different states to each other. 

The wide range taken into the field of pure politics, whilst in- 
vestigating the subject of political economy, was supposed to 
furnish a much stronger reason for including in the same inquiry 
agriculture, commerce and the arts, the true sources of wealth, 
and upon which laws have but an accidental and indirect influ- 
ence. Thence how many interminable digressions ! If com- 
merce, for example, forms a part of political economy, all the 
various kinds of commerce form apart; and as a consequence, 
maritime commerce, navigation, geography — where are we to 
stop? All the different branches of human knowledge are con- 
nected. It is, accordingly, necessary to ascertain their points 
of contact, or the articulations by which they are united; as by 
this means, a more exact knowledge will be obtained of what- 
ever is peculiar to each, and where they run into one another. 

In the science of political economy, agriculture, commerce 
and manufactures are considered only in relation to the increase 
or diminution of wealth; and not in reference to the execution 
of their processes. This science indicates the cases in which 
commerce is truly productive, where whatever is gained by one 
is lost by another, and where it is profitable to all; it also teaches 
us to appreciate its several processes, but simply in their results, 
at which it stops. Besides this knowledge, the merchant must 
also understand the processes of his art. He must be acquaint- 
ed with the commodities in which he deals, their qualities and 
defects, the countries from which they are derived, the means of 
transportation, the values to be given for them in exchange, and 
the method of keeping accounts. 

The same remark is applicable to the agriculturist, to the 
manufacturer, and to the practical man of business; for to ac- 
quire a thorough knowledge of the causes and consequences of 
each phenomenon, the study of pohtical economy is essentially 
necessary to them all; and to become expert in his particular 
pursuit, each one must add thereto a knowledge of its processes. 
These different subjects of investigation were not, however, con- 
founded by Dr. Smith; but neither he, nor the writers who suc- 
ceeded him, have guarded themselves against another source of 
confusion, here important to be noticed, inasmuch as the deve- 
lopments resulting from it, may not be altogether unuseful in the 
progress of general knowledge, as well as in the prosecution of 
our particular inquiry. 

In political economy, as in natural philosophy, and in every 
other study, systems have been formed before facts have been 
established ; the place of the latter being supplied by bold asser- 
tions. More recently, the inductive method of philosophizing, 
which, during the last half century, has so much contributed to 
the advancement of every other science, has been applied to the 



INTRODUCTION. XXI 

conduct of our researches in this. Has not ^his method itself, 
however, been employed, before really knowing in what its ex- 
cellence consists, and, consequently, before being acquainted 
with all the advantages to be derived from it? It is, in general, 
correctly enough said, that it consists in admitting only facts 
carefully observed, and the consequences rigorously deduced 
from t-hem ; thereby effectually excluding those prejudices and 
authorities which, in every department of literature and science, 
have so often been interposed between man and truth. But, is 
the wliole extent of the meaning of the term facts, so often made 
use of, understood 1 

It appears to me, that by this word must be understood, not 
only objects that exist, but events that take place; at once pre- 
senting two classes o[ facts: it is, for example, one fact, that 
such an object exists; another fact, that such an event takes 
place in such a manner. Objects that exist, in order to serve as 
the basis of certain reasoning, must be seen exactly as they are, 
under every point of view, with all their qualities. Otherwise, 
whilst supposing ourselves to be reasoning respecting the same 
thing, we may, under the same name, be treating of two different 
things. 

The second class of facts, namely, events that take place, con- 
sists of the phenomena exhibited, when we observe the manner 
in which things take place. It is, for instance, a fact, that me- 
tals, when exposed to a certain degree of heat, become fluid. 

The manner in which things exist and take place, constitutes 
what is called the nature of things ; and a careful observation of 
the nature of things is the sole foundation of all truth. 

Hence, a twofold classification of sciences; namely, those 
which may be styled descriptive, which arrange and accurately 
designate the properties of certain objects, as botany and natu- 
ral history; and those which may be styled experimental, which. 
unfold the reciprocal action of substances on each other, or in 
other words, the connexion between cause and effect, as che- 
mistry and natural philosophy. Both departments are founded 
on facts, and constitute an equally solid and useful portion of 
knowledge. Political economy belongs to the latter ; in show- 
ing the manner in which events take place in relation to wealth, 
it forms a part of experimental science.* 

But facts that take place may be considered in two points of 
viev/; either as general or constant, or as particular or variable. 
General facts are the results of the nature of things in all analo- 

* Experimental science, in order to establish why events take place in a 
certain manner, or to be able to assign a particular cause for a particular ef- 
fect, to a certain extent must be descriptive. Astronomy, in order to ex- 
plain the eclipses of the sun, must demonstrate the opacity of the moon. 
PoHtical economy, in like manner, in order to show that money is a means 
of the production of v^realth, but not the end, must exhibit its true nature. 



XXU INTRODUOTIOW. 

gous cases ; particular facts as truly result from the nature of 
things, but they are the result of several operations modified by 
each other in a particular case. The former are not less incon- 
trovertible than the latter, even when apparently they contradict 
each other. In natural philosophy it is a general fact, that heavy 
bodies fall to the earth; the water in a fountain, nevertheless, 
rises above it. The particular fact of the fountain is a result 
wherein the laws of equilibrium are combined with those of gra- 
vity, but without destroying them. 

In our present inquiry, the knowledge of these two classes of 
facts, to wit, of objects that exist, and of events that take place, 
embraces two distinct sciences, political economy and statistics. 

Political economy, from facts always carefully observed, 
makes known to us the nature of wealth; from the knowledge of 
its nature deduces the means of its creation, unfolds the order 
of its distribution and the phenomena attending its destruction. 
It is, in other words, an exposition of the general facts observed 
in relation to this subject. With respect to wealth, it is a know- 
ledge of effects and of their causes. It shows what facts are 
constantly conjoined; so that one is always the sequence of the 
other, and ivhj it is so. But it does not resort for any further 
explanations to hypothesis : from the nature of particular events 
their concatenations must be distinctly perceived ; the science 
must conduct us from one link to another, so that every intelli- 
gent understanding may clearly comprehend in what manner the 
chain is united. It is this which constitutes the excellence of 
the modern method of philosophizing. 

Statistics exhibits the production and consumption of a parti- 
cular country, at a designated period; its population, military 
force, wealth, and whatever else is susceptible of valuation. It 
is a description in detail. 

Between political economy and statistics there is the same 
difference as between politics and history. 

The study of statistics may gratify curiosity, but it can never 
be productive of advantage when it does not indicate the origin 
and consequences of the facts it has collected ; and by indicating 
their origin and consequences, it becomes at once political eco- 
nomy. This doubtless is the reason why these two distinct 
sciences have hitherto been confounded. The work of Dr. 
Adam Smith is but an immethodical assemblage of the soundest 
principles of political economy, supported by luminous illustra- 
tions ; and of highly ingenious researches in statistics, blended 
with instructive reflections ; it is not a complete treatise of either 
science, but an irregular mass of curious and original specula- 
tions and of known demonstrated truths. 

A perfect knowledge of political economy may be obtained, 
inasmuch as all the general facts which compose this science 
may be discovered. In statistics this never can be the case; 



INTRODUCTION. XXUl 

this latter science, like history, being a recital of facts, more or 
less uncertain, and necessarily incomplete. Of the statistics of 
former periods and distant countries, only detached and very im- 
perfect accounts can be furnished. With respect to the present 
time, there are few persons who unite the qualifications of good 
observers with a situation favourable for accurate observation. 
The inaccuracy of the statements inquirers are compelled to 
have recourse to, the restless suspicions of particular govern- 
ments and even individuals, their ill-will and indifference, present 
obstacles often insurmountable, notwithstanding their toil and 
care to collect minute details with exactness ; and which, after 
all, when in their possession, are only true for an instant. Dr. 
Smith accordingly avows that he puts no great faith in political 
arithmetic ; which is nothing more than the arrangement of nu- 
merous statistical data. 

Political economy, on the other hand, whenever the principles 
which constitute its basis are the rigorous deductions of undeni- 
able general facts, rests upon an immovable foundation. Gene- 
ral facts are undoubtedly founded upon the observation of particu- 
lar facts ; but upon such particular facts as have been selected 
from those most carefully observed, best established, and wit- 
nessed by ourselves. When the results of these facts have 
uniformly been the same, the cause of their having been so 
satisfactorily demonstrated, and the exceptions to them even 
confirming other principles, equally well established, we are au- 
thorised to give them as ultimate general facts, and to submit 
them with confidence to the examination of all competent inquir- 
ers, who may be again desirous of subjecting them to experiment. 
A new particular fact, when insulated, and the connexion between 
its antecedents and consequents not established by reasoning, is 
not sufficient to shake our confidence in a general fact ; for who 
' can say that some unknown circumstance has not produced the 
difference noticed in their several results 1 A light feather is seen 
to mount in the air, and sometimes remain there for a long time 
before it falls back to the ground. Would it not, nevertheless, be 
erroneous to conclude that this feather is not affected by the uni- 
versal law of gravitation? In pohtical economy it is a general fact, 
that the interest of money rises in proportion to the risk run by 
the lender of not being repaid. Shall it be inferred that this prin- 
ciple is false, from having seen money lent at a low rate of inte- 
rest upon hazardous occasions 1 The lender may have been ig- 
norant of the risk, gratitude or fear may have induced sacrifices, 
and the general law, disturbed in this particular case, will resume 
its entire force the moment the causes of its interruption have 
ceased to operate. Finally, how small a number of particular 
facts are completely established, and how few among them are 
observed under all their aspects ! And in supposing them well 
established, well observed, and well described, how many of thera 



XXIV INTRODUCTION. 

prove nothing, or directly the reverse of what is intended to be 
maintained by them ! 

Hence, there is not an absurd theory or extravagant opinion 
that has not been supported by an appeal to facts ;* and it is by 
facts also that public authorities have been so often misled. But 
a knowledge of facts, without a knowledge of their mutual rela- 
tion — without being able to show why the one is a cause and the 
other an effect, is really no better than the crude information of 
a public clerk, of whom the most intelligent seldom becomes ac- 
quainted with more than one particular series, which only enables 
him to examine a question in a single point of view. 

Nothing can be more idle than the opposition o( theory to prac- 
tice! What is theory, if it be not a knowledge of the laws which 
connect effects Vv'ilh their causes, or facts with facts 1 And who 
can be better acquainted with facts, than the theorist who surveys 
them under all their aspects, and comprehends their relation to 
each other? And what is practice'j" witliout theory, but the em- 
ployment of means without knowing how or why they act? In 
any investigation, to treat dissimilar cases as if they were ana- 
logous, is but a dangerous kind of empiricism, leading to conclu- 
sions never foreseen. 

Hence it is, that after having seen the exclusive or restrictive 
system of commerce, a system founded on the opinion that one 
nation can only gain what another loses, almost universally 
adopted throughout Europe after the revival of arts and letters ; 
after having seen taxation without intermission perpetually in- 
creasing, and in some countries extending itself to a most enor- 
mous amount ; and after having seen these same countries be- 
come more opulent, more populous, and more powerful, than at 
the time they carried on an unrestricted trade and were almost 
entirely exempt from public burdens, the generality of mankind 
have concluded that national wealth and power were attributable 
to the restraints imposed on the application of industry, and to 
the taxes levied from the incomes of individuals. Shallow think- 
ers have even pretended that this opinion was founded on facts, 
and that every different one was the offspring of a wild and dis- 
ordered imagination. 

It is, however, on the contrary evident that the supporters of 
the opposite opinion embraced a wider circle of facts, and under- 
stood them much better than their opponents. The very remark- 

* In France, the minister of the Interior in his expose of 1813, a most 
disastrous period, when foreign commerce was destroyed, and the national 
resources of every description rapidly declining-, boasted of having proved 
by indubitable calculations, that the country was in a higher state of pros- 
perity than it ever before had been. 

tBy the term practice, is not here meant the manual skill which enables 
the artificer or clerk to execute Vi^ith greater celerity and precision whatever 
he performs daily, and which constitutes his peculiar talent; but the method 
pursued in superintending and administering public or private affairs.- 



INTRODUCTION. XXV 

able impulse given to the industry of the free states of Italy du- 
ring the middle ages, and in the Hanse towns of the north of 
Europe, the spectacle of riches it exhibited in both, the shock of 
opinions occasioned by the crusades, the progress of the arts and 
sciences, the improvement of navigation and consequent discovery 
of the route to India and of the continent of America, as well as 
a succession of other less important events, were all known to 
them as the true causes of the increased opulence of the most 
ingenious nations on the globe. And although they were aware 
that this activity had received successive checks, they at the 
same time knew that it had been freed from more oppressive ob- 
stacles. In consequence of the authority of the feudal lords and 
barons declining, the intercourse between the different provinces 
and states could no longer be interrupted ; roads became improv- 
ed, traveUing more secure, and laws less arbitrary ; the enfran- 
chised towns, becoming immediately dependent upon the crown, 
found the sovereign interested in their advancement; and this en- 
franchisement, which the natural course of things and the pro- 
gress of civilization had extended to the country, secured to every 
class of producers the fruits of their industry. In every part of 
Europe personal freedom became more generally respected ; if 
not from a more improved organization of political society, at least 
from the influence of public sentiment. Certain prejudices, such 
as branding with the odious name of usury all loans upon inte- 
rest, and attaching the importance of nobility to idleness, bad 
begun to decline. Nor is this all. Enlightened individuals have 
not only remarked the influence of these, but of many other ana- 
logous facts ; it has been perceived by them, that the decline of 
prejudices has been favourable to the advancement of science, 
or to a more exact knowledge of the immutable laws of nature ; 
that this improvement in the cultivation of science has itself been 
favourable to the progress of industry, and industry to national 
opulence. From such an induction of facts they have been en- 
abled to conclude, with much greater certainty than the unthink- 
ing multitude, that although many modern states in the midst of 
taxation and restriction^ have risen to opulence and power, it is 
not owing to these restraints on the natural course of human af- 
fairs, but in spite of such powerful causes of discouragement. 
The prosperity of the same countries would have been much 
greater, had they been governed by a more liberal and enlighten- 
ed policy.* 

* Hence it is, that nations seldom derive any benefit from the lessons of 
experience. To profit by them, the community at large must be enabled to 
seize the connexion between causes and their consequences ; which at once 
supposes a very high degree of intelligence and a rare capacity for reflection. 
Whenever mankind shall be in a situation to profit by experience, they will 
no longer require her lessons ; plain sound sense will then be sufficient. This 
is one reason of our being subject to the necessity of constant control. All 



XXVl INTRODUCTION. 

To obtain a knowledge of the truth, it is not then eo necessary 
to be acquainted with a great number of facts, as with such as 
are essential and have a direct and immediate influence ; and 
above all, to examine them under all their aspects, to be enabled 
to deduce from them legitimate consequences, and be assured 
that the effects ascribed to them do not in reality proceed from 
other causes. Every other knowledge of facts, like the erudi- 
tion of an almanac, is a mere compilation from which nothing 
results. And it may be remarked, that this sort of information 
is peculiar to men of clear memories and clouded judgments ; 
who declaim against the best estabUshed doctrines, the fruits of 
the most enlarged experience and profoundest reasoning ; and 
whilst inveighing against system, whenever their own routine is 
departed from, are precisely those most under its influence, and 
who defend it with stubborn folly, fearful rather of being con- 
vinced, than desirous of arriving at certainty. 

Thus, if from all the phenomena of production, as well as from 
the experience of the most extensive commerce, you demonstrate 
that a free intercourse between nations is reciprocally advanta- 
geous, and that the mode found to be most beneficial to individuals 
in transacting business with foreigners, must be equally so to na- 
tions, men of contracted views and high presumption will accuse 
you of system. Ask them for their reasons, and they will im- 
mediately talk to you of the balance of trade ; will tell you it is 
clear that a nation must be ruined by exchanging its money for 
merchandise — in itself a system. Some will assert that circula- 
tion enriches a state, and that a sum of money, by passing 
through twenty different hands, is equivalent to twenty times its 
own value; others, that luxury is favourable to industry, and eco- 
nomy ruinous to every branch of commerce — both mere systems ; 
and all will appeal to facts in support of these opinions, like the 
shepherd, who upon the faith of his eyes affirmed that the sun, 
which he saw rise in the morning and set in the evening, during 
the day traversed the whole extent of the heavens, treating as an 
idle dream the laws of the planetary world. 

Persons, moreover, distinguished by their attainments in other 
branches of knov/ledge, but ignorant of the principles of this, are 
too apt to suppose that absolute truth is confined to the mathe- 
matics and to the results of careful observation and experiment 
in the physical sciences ; imagining, that the moral and political 
sciences contain no invariable facts or indisputable truths, and 
therefore can not be considered as genuine sciences, but merely 
hypothetical systems, more or less ingenious, but purely arbi- 
trary. The opinion of this class of philosophers is founded upon 
the want of agreement among the writers who have investigated 

that a people can desire is that laws conducive to the general interest of so- 
ciety shoidd be enacted and carried into effect ; a problem which different 
political constitutions more or less imperfectly solve. 



INTRODUCTION. XXVU 

these subjects, and from the wild absurdities taught by some of 
them. But what science has been free from extravagant hypo- 
theses? How many years have elapsed since those most advanced 
have been altogether disengaged from system? On the contrary, do 
we not still see men of perverted understandings attacking the best 
established positions? Forty years have not elapsed since water, 
so essential to our very existence, and the atmosphere in which 
we perpetually breathe, have been accurately analysed. The 
experiments and demonstrations, nevertheless, upon which this 
doctrine is founded, are continually assailed ; although repeated 
a thousand times in different countries by the most acute and cau- 
tious experimenters. A want of agreement exists in relation to 
a description of facts much more simple and obvious than the 
most part of those in moral and political science. Are not natural 
philosophy, chemistry, botany, mineralogy, and physiology still 
fields of controversy, in which opinions are combated with as 
much violence and asperity as in pohtical economy? The same 
facts are, indeed, observed by both parties, but are classed and 
explained differently by each ; and it is worthy of remark, that in 
these contests genuine philosophers are not arrayed against pre- 
tenders. Leibnitz and Newton, Linnaeus and Jussieu, Priestley 
and Lavoisier, Desaussure and Dolomieu were all men of uncom- 
mon genius, who, however, did not agree in their philosophical 
systems. But have not the sciences they taught an existence, 
notwithstanding these disagreements ?* 



* " The controversies," says Col. Torrens, in his ' Essay on the Production 
of Wealth,' published m 1821, "which at present exist amongst the most 
celebrated masters of political economy, have been brought forward by a 
lively and ingenious author as an objection against the study of the science. 
A similar objection might have been urged, in a certain stage of its progress, 
against every branch of human knowledge. A few years ago, when the bril- 
liant discoveries in chemistry began to supersede the ancient doctrine of phlo- 
giston controversies, analogous to those which now exist amongst political 
economists, divided the professors of natural knowledge; and Dr. Priestley, 
like Mr. Maltlms, appeared as the pertinacious champion of the theories 
which the facts established by himself had so largely contributed to over- 
throw. In the progress of the human mind a period of controversy amongst 
the cultivators of any branch of science must necessarily precede the pe- 
riod of their unanimity. But this, instead of furnishing a reason for aban- 
doning the pursuits of science while its first principles remain in uncertainty, 
should stimulate us to prosecute our studies with more ardour and persever- 
ance, until upon every question within the compass of the human faculties, 
doubt is removed and certainty attained. With respect to political economy, 
the period of controversy is passing away, and that of unanimity rapidly ap- 
proaching. Twenty years hence there will scarcely exist a doubt respecting 
any of its fundamental principles." 

And in the preface of the third edition of his ' Essay on the External Corn 
Trade,' published in 1826, Col. Torrens makes these farther remarks: "On 
a former occasion, the author ventured to predict, that, at no distant period, 
controversy amongst the professors of political economy would cease, and 
unanimity prevail, respecting the fundamental principles of the science. He 
thinks he can already perceive the unequivocal signs of the approaching ful- 

5 



XXVlll INTRODUCTION. 

In like manner, tbe general facts constituting the sciences of 
politics and morals exist independently of all controversy. Hence 
the advantage enjoyed by every one who, from distinct and ac- 
curate observation, can establish the existence of these general 
facts, demonstrate their connexion and deduce their conse- 
quences. They as certainly proceed from the nature of things 
as the laws of the material world. We do not imagine them;- 
they are results disclosed to us by judicious observation and 
analysis. Sovereigns, as well as their subjects, bow to their au- 
thority, and never can violate them with impunity. 

General facts, or, if you please, the general laws which facts 
follow, are styled principles whenever it relates to their applica- 
tion; that is to say, the moment we avail ourselves of them in 
order to ascertain the rule of action of any combination of cir- 
cumstances presented to us. A knowledge of principles fur- 
nishes the only certain means of uniformly conducting any in- 
quiry with success. 

Political economy, in the same manner as the exact sciences, 
is composed of a few fundamental principles, and of a great num- 
ber of corollaries or conclusions drawn from these principles. It 
is essential, therefore, for the advancement of this science that 
these principles should be strictly deduced from observation ; 
the number of conclusions to be drawn from them may after- 
Vi'ards be either multiplied or diminished, at the discretion of the 
inquirer, according to the object he proposes. To enumerate all 
their consequences and give their proper explanations would be 
a work of stupendous magnitude and necessarily incomplete. 
Besides, the more this science shall become improved and its influ- 
ence extended, the less occasion will there be to deduce conse- 
quences from its principles, as these will spontaneously present 
themselves to every eye; and being within the reach of all, their 
application will be readily made. A treatise on political econo- 
my will then be confined to the enunciation of a few general 
principles, not requiring even the support of proofs or illustra- 
tions; because these will be but the expression of what every 
one will know, arranged in a form convenient for comprehending 
thern, as well in their whole scope as in their relation to each 
other. 

It would, however, be idle to imagine that more precision, or 
a more steady direction could be given to this study, by the ap- 
plication of mathematics to the solution of its problems. The 
values with which political economy is concerned, admitting of 

filment of lliis prediction. Since it was hazarded, two works have appeared 
each of which, in its own peculiar line, is eminently calculated to correct the 
errors which previously prevailed. These publications are, "A Critical Dis- 
sertation on the Nature, Causes, and Measures of Value, by an anonymous 
author;" and "Thoughts and Details on High and Low prices, by Mr» 
Tooke." 



INTRODtJCTIOK. XXIX 

the application to them of the terms plus and mimis, are indeed, 
within the range of mathematical inquiry; but being, at the same 
time, subject to the influence of the faculties, the wants and the 
desires of mankind, they are not susceptible of any rigorous ap- 
preciation, and can not, therefore, furnish any data for absolute 
calculations. In political as well as in physical science, all that 
is essential is a knowledge of the connexion between causes and 
their consequences. Neither the phenomena of the moral or 
material world are subject to strict arithmetical computation.* 

* We may, for example, know that for any given year the price of wine 
will infallibly depend upon the quantity to be sold, compared with the ex- 
tent of the demand. But if we are desirous of submitting these two data 
to mathematical calculation, tlieir ultimate elements must be decomposed 
before we can become thoroughly acquainted with them, or can, with any 
degree of precision, distinguish the separate influence of each. Hence, it 
is not only necessary to determine Avhat will be the product of the succeed- 
ing vintage, while yet exposed to the vicissitudes of the weather, but the 
quality it will possess, the quantity remaining on hand of the preceding 
vintage, the amount of capital that will be at the disposal of the dealers, 
and require them, more or less expeditiously, to get back their advances. 
We must also ascertain the opinion that may be entertained as to the possi- 
bility of exporting the article, which will altogether depend upon our im- 
pressions as to the stability of the laws and government, that vary from day 
to day, and respecting which no two individuals exactly agree. All thesa 
data, and probably many others besides, must be accurately appreciated, 
solely to determine the quantity to be put in circulation; itself but one of 
the elements of price. To determine the quantity to be demanded, the price 
at which the commodity can be sold must already be known, as the demand 
for it will increase in proportion to its cheapness ; we must also know the 
former stock on hand, and the tastes and means of the consumers, as vari- 
ous as their persons. Their ability to purchase will vary according to the 
more or less prosperous condition of industry in general and of their own 
in particular ; their wants will vary also in the ratio of the additional means 
at their command of substituting one liquor for another, such as beer, cider, 
&c. I suppress an infinite number of less important considerations, mora 
or less affecting the solution of the problem ; for I question whether any in- 
dividual, really accustomed to the application of mathematical analysis, 
would even venture to attempt this, not only on account of the numerous 
data, but in consequence of the difficulty of characterizing them with any 
thing like precision, and of combining their separate influences. Such per- 
sons as have pretended to do it, have not been able to enunciate these ques- 
tions in analytical language, without divesting them of their natural com- 
plication, by means of simplifications, and arbitrary suppressions, of which 
the consequences, not properly estimated, always essentially change the 
condition of the problem, and pervert all its results; so that no other infer- 
ence can be deduced from such calculations than from formula arbitrarily 
assumed. Thus, instead of recognising in their conclusions that harmoni- 
ous agreement which constitutes the peculiar character of rigorous geome- 
trical investigation, by whatever method they may have been obtained, we 
only perceive vague and uncertain inferences, whose differences are often 
equal to the quantities sought to be determined. What course is then to 
be pursued by a judicious inquirer in the elucidation of a subject so much 
involved ? The same which would be pursued by him, under circumstances 
equally difficult, which decide the greater part of the actions of his life. 
He will examine the immediate elements of the proposed problem, and af- 
ter having ascertained them with certainty, (which in political economy 



XXX INTRODUCTION. 

These considerations respecting the nature and object of po- 
litical economy, and the best method of obtaining a thorough 
knowledge of its principles, will supply us with the means of ap- 
preciating the efforts hitherto made towards the advancement of 
this science. 

The literature of the ancients, their legislation, their public 
treaties, and their administration of the conquered provinces, all 
proclaim their utter ignorance of the nature and origin of wealth, 
of the manner in which it is distributed, and of the eflects of its 
consumption. They knew, what has always been known wher- 
ever the right of property has been sanctioned by laws, that 
riches are increased by economy and diminished by extravagance. 
Xenophon extols order, activity and intelligence ascertain means 
of obtaining prosperity; but without deducing these maxims 
from any general law, or without being able to show the connex- 
ion between causes and their consequences. He advises the 
Athenians to protect commerce and to receive strangers with 
kindness; yet so little was he aware to what extent this adv'ice 
would be proper, that, upon another occasion, he expresses 
doubts whether commerce be really profitable to the republic. 

Plato and Aristotle, it is true, notice some invariable rela- 
tions between the different modes of production, and the results 
obtained from them. Plato sketches with tolerable fidelity,* the 



can be effected,) will approximately value their mutual influences with the 
intuitive quickness of an enlightened understanding, itself only an instru- 
ment by means of which the mean result of a crowd of probabilities can be 
estimated, but never calculated with exactness. 

Cabanis, in describing the revolutions in the science of medicine, makes 
a remark perfectly analogous to this. ' The vital phenomena,' says he, ' de- 
pend upon so many unknown springs, held together under such various cir- 
cumstances, which observation vainly attempts to appreciate, that these 
problems, from not being stated with all their conditions, absolutely defy 
calculation. Hence, whenever writers on mechanics have endeavoured to 
subject the laws of life to their methods, they have furnished the scientific 
world w^ith a remarkable spectacle, well entitled to our most serious consi- 
deration. The terms they employed were correct, the process of reasoning 
strictly logical, and, nevertheless, all the results were erroneous. Further, 
although the language and the method of employing it were the same among 
all the calculators, each of them obtained distinct and difierent results; 
and it is by the application of this method of investigation to subjects to 
which it is -altogether inapplicable, that systems the most whimsical, falla- 
cious and contradictory have been maintained.' 

D'Alembert, in his treatise on Hydrodynamics, acknowledges that the 
velocity of the blood in its passage through the vessels entirely resists every 
kind of calculation. Senebier made a similar observation in his Essai sur 
V Art d'' observer, (vol. 1, page 81.) 

Whatever has been said by able teachers and judicious philosophers, in 
relation to our conclusions in natural science, is much more applicable to 
moral; and points out the cause of our always being misled in political eco- 
nomy, whenever we have subjected its phenomena to mathematical calcula- 
tion. In such case it becomes the most dangerous of all abstractions. 

* Republic, Book II. 



INTRODUCTION. XXXI 

effects of the separation of social employments; but it is simply 
with a view to illustrate man's social character and the necessity 
he is in, from his multifarious wants, of uniting in extensive so- 
cieties in which each individual may be exclusively occupied with 
one species of production. His view is entirely a political one; 
and he has deduced from it no other conclusion. 

In his Politics, Aristotle goes farther. He distinguishes na- 
tural from artificial production. He styles natural, whatever 
creates those objects of consumption required by a family, or, at 
most, whatever is obtained by exchanges in kind. . No other 
advantage, according to him, is derived from real production; 
artificial gain he condemns. Besides, he does not support these 
opinions by any reasoning founded upon accurate observation. 
From the manner in which he expresses himself in relation to 
the effeqt of savings and loans on interest, it is evident that he 
knew nothing of the nature and employment of capital. 

What can we expect from nations still less advanced in civili- 
zation than the Greeks'? We may recollect that a law of Egypt 
obliged the son to adopt the profession of his father. This, in 
certain cases, was to require the creation of a greater quantity of 
products than the particular state of society called for; to oblige 
an individual, in order to obey the law, to ruin himself and to 
continue the exercise of his productive functions, whether in 
possession of capital or not; which is altogether absurd.* The 
Romans, in treating every branch of industry, except agriculture 
(and we know not why,) with contempt, betray the same igno- 
rance. Their pecuniary transactions must be numbered amongst 
their most unskilful operations. 

The moderns, even after having freed themselves from the 
barbarism of the middle ages, have not a very long time been 
more advanced. We shall have occasion to notice the stupidi- 
ty of a multitude of laws relating to the Jews, to the interest of 
money, and to money itself. Henry IV. granted to his favour- 
ites and mistresses, as favours ivhich cost him nothing, the per- 
mission to practise a thousand petty extortions, and to collect 
for their own benefit from various branches of commerce as 
many petty taxes. lie authorized the count of Soissons to levy 
a duty of fifteen sous upon every bale of merchandise which 
should be exported from the kingdom !f 

In every branch of knowledge, example has preceded pre- 
cept. The fortunate enterprises of the Portuguese and Span- 
iards during the fifteenth century, the active industry of Venice, 
Genoa, Florence, Pisa, the provinces of Flanders, and the free 

* When we find almost every historian, from Herodotus to Bossuet, boast- 
ing of tliis and other similar laws, it will be seen how important it is that 
all who undertake to write history should have some knowledge of the 
science of political economy. 

t iSee Sully's memoirs. Book xvi. 



XXXU INTRODUCTION. 

cities of Germany at this same epoch, gradually directed the at- 
tention ©f some philosophers to the theory of wealth. 

These inquiries, like ahT)ost every other in the arts and sci- 
ences after the revival of letters, originated in Italy. As far 
back as the sixteenth century, Botero was engaged in investigat- 
ing the real sources of public prosperity. In the year 1613, 
Antonio Serra composed a treatise, in which he particularly no- 
ticed the productive power of industry; but the title of his work 
sufficiently indicates its errors. Wealth, according to his hypo- 
thesis, consisted only of gold and silver.* Davanzali wrote upon 
money and upon exchange; and at the beginning of the eigh- 
teenth century, fifty years before the time of Quesnay, Bandini 
of Sienna had shown, both from reasoning and experience, that 
there never had been a scarcity of food, except in those coun- 
tries where the government had itself interfered to supply the 
people. BeUoni, a banker at Rome, in the year 1750, published 
a dissertation on commerce, evincing his intimate acquaintance 
with the nature of money and exchanges, although at the same 
time infected with the theory of the balance of trade. His la- 
bours were rewarded by the Pope with the title of marquess. 
Carli, before Dr. Smith, demonstrated that the balance of trade 
neither taught nor proved any thing. Jllgaroiti, whose writings 
on other subjects Voltaire has made known, wrote also upon the 
science of political economy; and the Uttle he has left exhibits 
the accuracy and extent of his knowledge, as well as his acute- 
ness. He confines himself so rigidly to facts, and so uniformly 
founds his speculations on the nature of things, that although he 
did not get possession of the proof of his principles, and of their 
relation to each other, he has nevertheless guarded himself 
against every thing like hypothesis and system. In 1764, Ge- 
novesi commenced a course of public lectures on political econo- 
my, in the chair founded at Naples by the care of the highly es- 
teemed and learned Intieri. In consequence of this example, 
other professorships of political economy were afterwards estab- 
lished at Milan, and more recently in most of the universities in 
Germany and Russia. 

In 1750, the abbe Galiani, so well known since from his con- 
nexion with many of the French philosophers, and by his Dia- 
logues on the Corn Trade, although at that time a very young 
man, published a Treatise on Money, which discovered such un- 
common talents and information, as to induce a belief that he 
had been assisted in the composition of his work by the abbe 
Intieri and the Marquess oi Rhmccini. Its merits, however, 'ap- 
pear to be of a description similar to those the author's writings 
always afterwards displayed; genius united with erudition, care- 

* Breve Trattato delle cause cJu possonofar ahondare U regni d'oro et d'ar- 
gtnto dove non sono niiniere. 



INTRODUCTION. SXXHl 

fulness in always ascending to the nature of things ; and an ani- 
mated and elegant style. 

One of the most striking peculiarities of this work, is its con- 
taining some of the rudiments of the doctrine of Adam Smith; 
among others, that labour is the sole creator of the value of 
things or of wealth ;* a principle although not rigorously true, 
as will be made manifest in the course of this work, but which 
pushed to its ultimate consequences, would have put Galiani in 
the way of discovering and completely unfolding the phenomena 
of production. Dr. Smith, who was about the same time a pro- 
fessor in the university of Glasgow, and then taught this doctrine, 
which has since acquired so much celebrity, in all probability 
had no knowledge of a work in the Italian language published at 
Naples by a young man then hardly known, and whom he has 
never quoted. But even had he known it, a truth can not with 
so much propriety be said to belong to its fortunate discoverer, 
as to the inquirer who first demonstrates that it must be so and 
perceives its consequences. Although the existence of univer- 
sal gravitation had been previously conjectured by Kepler and 
Pascal, the discovery does not the less belong to Newton. f 

In Spain, Alvarez Osorio and Martines-de-mata have deliver- 
ed discourses on political economy, the publication of which we 
owe to the enlightened patriotism of Campomanes. Moncada, 
Ifavaretta, Ustaritz, Ward, and TJlloa have written on the same 
subject. These esteemed authors, like those of Italy, enter- 

* " Entro ora a dire della factica, la quale, non solo in tutte le opere que 
sono intieramente dell' arte come le pitture, sculture, intagli, etc., ma anchi 
in molti corpi, come sono i minerali, i sassi, le piante spontanee delle solve, 
etc. e I'unica clie da valore alia cosa. La quantita della materia non per 
altro coopera in qiiesti corpi al valore se non parclie aumenta o seema la 
fatica." (Galiani, della Moneta. Lib. I, cap. 2.) 

" In relation to labour I will remark, that not only in the productions 
which are entirely the work of art, as in painting, sculpture, engraving-, &,c. 
but likewise in the productions of nature, as on metals, minerals and plants, 
their value is entirely derived from the labour bestowed on their creation. 
The quantity of matter affects the value of things only as far as it requires 
more or less labour." 

In the same chapter Galiani also remarks, that man, that is to say his la- 
bour, is the only correct measure of value. This, also, according to Dr. 
Smith, is a principle ; although considered by me as an error. 

t This same Galiani, in the same work remarks, that whatever is gained 
by some must necessarily be lost by others; in this way proving, that a very 
ingenious writer may not even know how to deduce the most simple conclu- 
sions, and may pass by the truth without perceiving it. For, if wealth can 
be created by labour, there may then be a new description of wealth in the 
world, not taken from any body. Indeed this author, in his Dialogues on 
the Corn Trade, published in France a long time afterwards, has himself, in 
a very peculiar manner, pronounced his own condemnation. " A truth," 
he observes, " which is brought to light by pure accident, like a mushroom 
in a meadow, is of no value; we can not make use of it, if we are ignorant of 
its origin and consequences ; or how and by what chain of reasoning it is de. 
rived." 



XXxiv INTRODUCTION. 

tained many sound views, verified various ' .iportant facts, and 
supplied a number of laborious calculations ; but from their ina- 
bility to establish them upon the fundamental principles of the 
science, which were not then known, they have often been mis- 
taken both as to the end as well as the means of prosecuting this 
study; and amidst a variety of useless disquisitions have only 
cast an uncertain and deceptive light.* 

In France the science of political economy, at first, was only 
considered in its application to public finances. Sully remarks 
correctly enough, that agriculture and commerce are the two 
teats of the state; but from a vague and indistinct conception of 
the truth. The same observation may be applied to Vaiiban, a 
man of a sound practical mind, and although in the army, a phi- 
losopher and friend of peace, who being deeply afflicted with the 
misery into which his country had been plunged by the vain 
glory of Louis the Fourteenth, proposed a more equitable as- 
sessment of the taxes, as a means of alleviating the public bur- 
dens. 

Under the influence of the Regent; opinions became unsettled; 
bank notes, supposed to be an inexhaustible source of wealth, 
were only the means of swallowing up capital, of expending 
what had never been earned, and of making a bankruptcy of all 
debts. Moderation and economy were turned into ridicule. 
The courtiers of the prince, either by persuasion or corruption, 
encouraged him in every species of extravagance. At this pe- 
riod, the maxim that a state is enriched by luxury was reduced 
to system. All the talents and learning of the day were exerted 
in gravely maintaining such a paradox in prose, or in embellish- 
ing it with the more attractive charms of poetry. The dissipa- 
tion of the national treasures was really supposed to merit the 
public gratitude. The ignorance of first principles, with the de- 
bauchery and licentiousness of the duke of Orleans, conspired to 
effect the ruin of the kingdom. During the long peace maintain- 
ed by cardinal Fleury, France recovered a little; the insignifi- 
cant administration of this weak minister at least proving, that 
the ruler of a nation may achieve much good by abstaining from 
the commission of evil. 

The steadily increasing progress of different branches of in- 
dustry, the advancement of the sciences, whose influence upon 
wealth we shall have occasion hereafter to notice, and the direc- 
tion of public opinion, at length estimating national prosperity as 
being of some importance, caused the science of political econo- 
my to enter into the contemplation of a great number of writers. 

* From my own inability of judging of the merits of such of these writers 
whose works have not been translated, I have availed myself of the opinions 
of one of the translators of this Treatise into the Spanish language, Don Jose 
Queypo, an individual alike distinguished by his abilities and patriotism, 
whose remarks I have only copied. 



INTRODUCXION. XXXV 

Its true principles T^fere not then known ; but since, according to 
the observation of Fontenelle, our condition is such, that we are 
not permitted at once to arrive at the truth, but must previously 
pass through various species of errors and various grades of fol- 
lies, ought these false steps to be considered as altogether use- 
less, which have taught us to advance with more steadiness and 
certainty 1 

Montesquieu, who was desirous of considering laws in all their 
relations, inquired into their influence on national wealth. The 
nature and origin of wealth he should first have ascertained ; of 
which, however, he did not form any opinion. We are, never- 
theless, indebted to this distinguished author for the first philoso- 
phical examination of the principles of legislation; and, in this 
point of view, he, perhaps, may be considered as the master of 
the English writers, who are so generally esteemed as being 
ours; Justin the same manner as Voltaire has been the master 
of their best historians, who now furnish us with models worthy 
of imitation. 

About the middle of the eighteenth century, certain principles 
in relation to the origin of wealth, advanced by Doctor Quesnaijy 
made a great number of proselytes. The enthusiastic admira- 
tion these persons manifested for the founder of these doctrines, 
the scrupulous exactness with which they have uniformly since 
followed the same dogmas, and the energy and zeal they dis- 
played in maintaining them, have caused them to be considered 
as a sect, which has received the name of economists. Instead 
of first observing the nature of things, or the manner in which 
they take place, of classifying these observations and deducing 
from them general propositions, they commenced by laying down 
certain abstract general positions, which they styled axioms, from 
supposing them to contain intuitive evidence of their own truth. 
They then endeavoured to accommodate the particular facts to 
them, and to infer from them their laws ; thus involving them- 
selves in the defence of maxims evidently at variance with com- 
mon sense and universal experience,* as will appear hereafter 
in various parts of this work. Their opponents had not them- 
selves formed any more correct views of the subjects in contro- 
versy. With considerable learning and talents on both sides, 
they were either wrong or right by chance. Points were con- 
tested that should have been conceded, and opinions, unques- 
tionably false, acquiesced in; in short, they combated in the 
clouds. Voltaire, who so well knew how to detect the ridicu- 
lous, wherever it was to be found, in his Homme aux quarante 
ecus, satirized the system of the economists ; yet, in exposing 
the tiresome trash of J\Iercer de la Riviere, and the absurdities 

* When they maintain, for example, that a fall in the price of food is a 
public calamity. 

6 



XXXVl INTRODUCTION. 

contained in JWirabeait's L'ami des Hommes, he was himself un- 
able to point out the errors of either. 

The economists, by promulgating some important truths, di- 
recting a more general attention to objects of public utility, and 
by exciting discussions, which although at that time of no advan- 
tage, subsequently led to more accurate investigations, have un- 
questionably done much good.* In representing agricultural in- 
dustry as productive of wealth, they were not deceived; and, 
perhaps, the necessity they were in of unfolding the nature of 
production, caused the further examination of this important 
phenomenon, which conducted their successors to its entire de- 
velopment. On the other hand, the labours of the economists 
have been attended with serious evils; the many useful maxims 
they decryed, their sectarian spirit, the dogmatical and abstract 
language of the greater part of their writings, and the tone of in- 
spiration pervading them, gave currency to the opinion, that all 
who were engaged in such studies were but idle dreamers, whose 
theories, at best only gratifying literary curiosity, were wholly 
inapplicable in practice. f 

No one, however, has ever denied that the writings of the 
economists have uniformly been favourable to the strictest mo- 
rality and to the liberty, which every human being ought to pos- 
sess, of disposing of his person, fortune and talents, according 
to the bent of his inclination ; without which, individual happi- 
ness and national prosperity are but empty and unmeaning 
sounds. These opinions alone entitle their authors to universal 
gratitude and esteem. I do not, moreover, believe that a disho- 
nest man or bad citizen can be found among their number. 

* Among the discussions they provoked, we must not forget the enter- 
taining Dialogues on the Corn Trade, by the Abbe Galiani, in which the 
science of political economy is treated in the humorous manner of Tristram 
Shandy. An important truth is asserted, and when tlie author is called 
upon for its proof, he replies with some ingenious pleasantry. 

t The belief that moral and political science is founded upon chimerical 
theories, arises chiefly from our almost continually confounding questions of 
right with matters of fact. Of what consequence, for instance, is the ques- 
tion so long agitated in the writings of the economists, whether the sove- 
reign power in a country is, or is not, the co-proprietor of the soil? The fact 
is, that in every country the government takes, or in the shape of taxes the 
people are compelled to furnish it, with a part of the revenue drawn from 
real estate. Here then is a fact, and an important one ; the consequence of 
certain facts, which we can trace up, as the cause of other facts (such as 
the rise in the price of commodities) to which we are led with certainty. 
Questions of right are always more or less matters of opinion ; maWers of fact, 
on the contrary, are susceptible of proof and demonstration. The former 
exercise but little influence over the fortunes of mankind ; while the latter, 
inasmuch as facts grow out of each other, are deeply interesting to them ; 
and, as it is of importance to us that some results should take place in pre- 
ference to others, it is, therefore, essential to ascertain the means by which 
these may be obtained. The Social Contract of J. J. Rousseau, from being 
almost entirely founded upon ^wes/Jows nfright,h<iB thereby become, what I 
feel no hesitation in avowing, a work of at least but little practical utility. 



INTRODUCTION. XXXVIl 

This doubtless is the reason why since the year 1760, almost 
all the French writers of any celebrity on subjects connected 
with political economy, without absolutely being enrolled under 
the banners of the economists, have, nevertheless, been influen- 
ced by their opinions. Raynal, Condorcet, and many others, 
will be found among this number. Conditlac may also be enu- 
merated among them, notwithstanding his erdeavours to found a 
system of his own in relation to a subject which he did not under- 
stand. Many useful hints may be collected from amidst the in- 
genious trifling of his work;* but, like the economists, he al- 
most invariably founds a principle upon som.e gratuitous assump- 
tion. Now, an hypothesis may indeed be resorted to, in order 
to exemplify and elucidate the correctness of an author's general 
reasoning, but never can be sufficient to establish a fundamental 
truth. Political economy has only become a science, since it 
has been confined to the results of inductive investigation. 

Turcot was himself too good a citizen, not sincerely to esteem 
as good citizens as the economists; and, accordingly, when in 
power, he deemed it advantageous to countenance them. The 
economists, in their turn, found their account in passing off so 
enlightened an individual and minister of state as one of their 
adepts; the opinions of Turgot, however, were not borrowed 
from their school, but derived from the nature of things ; and al- 
though on many important points of doctrine he may have been 
deceived, the measures of his administration, either planned or 
executed, are amongst the most brilliant ever conceived by any 
statesman. There can not therefore be a stronger proof of the 
incapacity of his sovereign, than his inability to appreciate such 
exertions, or if capable of appreciating them, in not knowing 
how to afford them support. 

The economists not only exercised a particular sway over 
French writers, but also had a very remarkable influence over 
many Italian authors, who even went beyond them. Beccaria, 
in a course of pubUc lectures at Milan, "f first analysed the true 
functions of productive capital. The Count de Verri, the coun- 
tryman and friend of Beccaria and worthy of being so, both a 
man of business and an accomplished scholar, in his JMenita- 
zione suW Economia politica, published in 1771, approached 
nearer than any other writer before Dr. Smith, to the real laws 
which regulate the production and consumption of wealth. Fi- 
langieri, whose treatise on political and economical laws was 
not given to the public until the year 1780, appears not to have 

* Du Commerce et du Governement consid^res Viin relativement a Vautre. 

t >S'ee the syllabus of his lectures, which was printed for the first time in 
the year 1804, in the valuable collection published at Milan hy Pietro Cus- 
todi, under the title of Scrittori classici italiani di economia politica. It was 
unknown to me until after the publication of the first edition of this work in 
1803. 



XXXVIU INTRODUCTION. 

been acquainted with the work of Dr. Smith, published four 
years before. The principles de Verri laid down are followed 
by Filangieri, and even-received from him a more complete de- 
velopment; but although guided by the torch of analysis and de- 
duction, he did not proceed from the most fortunate premises 
to the immediate consequences which confirm them, at the same 
time that they exhibit their application and utility. 

But none of these inquiries could lead to any important result. 
How, indeed, was it possible to become acquainted with the 
causes of national prosperity, when no clear or distinct notions 
had been formed respecting the nature of wealth itself? The 
object of our investigations must be thoroughly perceived be- 
fore the means of attaining it are sought after. In the year 
1776, Jlclam Smith, educated in that school in Scotland which 
has produced so many scholars, historians and philosophers of 
the highest celebrity, published his Inquiry into the JYalure and 
Causes of the Wealth of Nations. In this work, its author de- 
monstrated that wealth was the exchangeable value of things; 
that its extent was proportional to the number of things in our 
possession having value ; and, that inasmuch as value could be 
given or added to matter, that wealth could be created and en- 
grafted on things previously destitute of value, and there be pre- 
served, accumulated or destroyed.* 

In inquiring into the origin of value. Dr. Smith found it to be 
derived from the labour of man, which he ought to have deno- 
minated industry, from its being a more comprehensive and sig- 
nificant term than labour. From this fruitful demonstration he 
deduced numerous and important conclusions respecting the 
causes which, from checking the development of the productive 
powers of labour, are prejudicial to the growth of wealth; and 
as they are rigorous deductions from an indisputable principle, 
they have only been assailed by individuals, either too careless 
to have thoroughly understood the principle, or of such pervert- 
ed understandings as to be wholly incapable of seizing the con- 
nexion or relation between any two ideas. Whenever the In- 

* During the same year that Dr. Smith's work appeared, and immediately 
before its publication, Broivne Dignan, published in London, written in the 
French language, his Essai surjes princifes de rEconomie puUique, con- 
taining the following remarkable passage : " The class of reproducers in- 
cludes all who, uniting their labour to that of the vegetative power of the 
soil, or modifying the productions of nature in the processes of their several 
arts, create in some sort a netv value, of which the sum total forms what is 
called the annual reproduction^ 

This striking passage, in which reproduction is more clearly characteris- 
ed than in any part of Dr. Smith's writings, did not lead its author to any 
important conclusions, but merely gave birth to a few scattered hints. A 
want of connexion in his views, and of precision in his terms, have rendered 
his Essay so vague and obscure, that no instruction whatever can be deriv- 
ed from it. 



intkoduction; xxxix 

quiry into the Wealth of Nations is perused with the attention it 
so well merits, it will be perceived, that until the epoch of its 
publication the science of political economy did not exist. 

From this period gold and silver coin were considered as con- 
stituting only a portion, and but a small portion, of national 
wealth; a portion the less important, because less susceptible of 
increase, and because its uses can be more easily supplied than 
those of many other articles equally valuable; and hence it re- 
sults that a community, as well as its individual members, are 
in no way interested in obtaining metallic money beyond the ex- 
tent of this limited demand. 

These views, we conceive, first enabled Dr. Smith to ascer- 
tain, in iheir whole extent, the true functions of money; and the 
applications of them, which he made to bank notes and paper 
money, are of the utmost importance in practice. They afford 
hirn the means of deraonstratin-g, that productive capital does 
not consist of a sum of money, but in the value of the objects 
made use of in production. He arranged and analysed the ele- 
ments of which productive capital is composed, and pointed out 
their true functions.* 

Many principles strictly correct had often been advanced prior 
to the time of Dr. Smith ;-f he, however, was the first author 
who estabhshed their truth. Nor is this all. He has furnished 
us, also, whh the true method of detecting errors; he has ap- 
plied to political economy the new mode of scientific investiga- 
tion, namely, of not looking for principles abstractedly, but by 
ascending from facts the most constantly observed to the gene- 
ral laws which govern them. As every fact may be said to have 
a particular cause, it is in the spirit of system to determine the 
cause; it is in the spirit of analysis, to be sohcitous to know ivhy 
a particular cause has produced this effect, in order to be satis- 
fied that it could not have been produced by any other cause. 
The work of Dr. Smith is a succession of demonstrations, which 
has elevated many propositions to the rank of indisputable prin- 
ciples, and plunged a still greater number into that imaginary 

* This difHcult and abstruse subject has not, perhaps, been treated by Dr. 
Smith with suiHcient method and perspicuity. Owing to this circumstance, 
his intelligent and acute coimtryman, lord Lauderdale, has composed an 
entire treatise, in order to prove that his lordship had completely failed in 
comprehending this part of the Wealth of Nations. 

t In the article Grains, in the Encyclopedie, Quesnay had remarked, that 
" commodities, which can be sold, ought always to be considered without 
distinction, either as pecuniary or real wealth, applicable to the purposes of 
whoever may make use of it." This, in reality, is Dr. Smith's exchangeable 
value. De Verri bad observed, (chapter 3,) that reproduction was nothing 
more than the reproduction of value, and that the value of things constituted 
wealth. Galiani, as has been already noticed, had said, that labour was the 
source of all value; but Dr. Smith, nevertheless, made these views his 
own, by exhibiting, as we see, their connexion with all the other important 
phenomena, and in demonstrating theni even by their consequences. 



Xl INTRODUCTION. 

gulph, into which extravagant hypotheses and vague opinions for 
a certain period struggle, before being forever swallowed up. 

It has been said that Dr. Smith was under heavy obligations 
to Steuart* an author whom he has not once quoted, even for 
the purpose of refuting him. I can not perceive in what these 
obligations consist. In the conception of his subject. Dr. Smith 
displays the elevation and comprehensiveness of his views, whilst 
the researches of Steuart exhibit but a narrow and insignificant 
scope. Steuart has supported a system already maintained by 
Colbert, adopted afterwards by all the French writers on com- 
merce, and steadily followed by most European governments; a 
system which considers national wealth as deponding, not upon 
the sum total of its productions, but upon the amount of its sales 
to foreign countries. One of the most important portions of 
Dr. Smith's work is devoted to the refutation of this theory. If 
he has not particularly refuted Steuart, it is from the latter not 
being considered by him as the father of his school, and from 
having deemed it of more importance to overthrow an opinion, 
then universally received, than to confute the doctrines of an 
author, which, in themselves, contained nothing peculiar. 

The economists have also pretended, that Dr. Smith was 
under obligations to them. But to what do such pretensions 
amount? A man of genius is indebted to everything around 
him ; to the scattered lights which he has concentrated, to the 
errors which he has overthrown,. and even to the enemies by 
whom he has been assailed; inasmuch as they all contribute to 
the formation of his opinions. But when out of these materials 
he afterwards forms enlarged views, useful to his contempora- 
ries and posterity, it rather behoves us to acknowledge the extent 
of our own obligations, than to reproach him with what he has 
been supplied by others. Moreover, Dr. Smith has not been 
backward in acknowledging the advantages he had derived from 
his intercourse with the most enlightened men in France, and 
from his intimate correspondence with his friend and countryman 
Hume, whose essays on political economy, as well as on various 
other subjects, contain many just views. 

After having shown, as fully as so rapid a sketch will permit, 
the improvement which the science of political economy owes to 
Dr. Smith, it will not, perhaps, be useless to indicate, in as sum- 
mary a manner, some of the points on which he has erred, and 
others which he has left to be elucidated. 

To the labour of man alone he ascribes the power of produc- 
ing values. This is an error. A more exact analysis demon- 
strates, as will be seen in the course of this work, that all values 
are derived from the operation of labour, or rather from the in- 
dustry of man, combined with the operation of those agents 

*Sir James Steuart, author of a Treatise on Political Economy. 



INTRODUCTION. xli 

which nature and capital furnish him. Dr. Smith did not there- 
fore obtain a thorough knowledge of the most important pheno- 
menon in production; this has led him into some erroneous con- 
clusions, such, for instance, as attributing a gigantic influence 
to the division of labour, or rather to the separation of employ- 
ments. This influence, however, is by no ntieans inappreciable 
or even inconsiderable; but the greatest wonders of this descrip- 
tion are not so much owing to any peculiar property in human 
labour, as to the use we make of the powers of nature. His 
ignorance of this principle precluded him from establishing the 
true theory of machinery in relation to the production of wealth. 
The phenomena of production being now better known than 
they were in the time of Dr. Smith, have enabled his successors 
to distinguish and to assign the difference found to exist between 
a real and a relative rise in prices;* a difference which furnishes 
the solution of numerous problems, otherwise wholly inexplica- 
ble. Such, for example, as the following: Does a tax, or any 
other impost, by enhancing the price of commodities, increase the 
amount of iveallhV\ The income of the producer arising from the 
cost of production, why is not this income impaired by a diminution 
in the cost of production? Now it is the power of resolving these 
abtruse problems which, nevertheless, constitutes the science of 
political economy. J 

* See Chapter third, Book second. 

t Dr. Smith has, in a satisfactory manner, established the difference be- 
tween the real and nominal prices of things, that is to say, between the 
quantity of real values which must be given to obtain a commodity, and the 
name which is given to the sum of these values. The diiference here al- 
luded to, arises from a more perfect analysis, in which the real price itself 
is decomposed. 

X It is not, for example, until after the manner in which production takes 
place is thoroughly imderstood, that v/e can say how far the circulation of 
money and commodities have contributed towards it, and consequently 
what circulation is useful and what is not ; otherwise, we sliould only talk 
nonsense, as is daily done, respecting the utility of a quick circulation. My 
being obliged to furnish a chapter on this subject (Book I, Chap. 16.) must 
be attributed to the inconsiderable advancement made in the science of po- 
litical economy, and to the consequent necessity of directing our attention 
to some of its more simple applications. The same remark is applicable to 
the twentieth chapter, in the same book, on tlie subject of temporary and 
permanent emigration, considered in reference to national wealth. Any per- 
son, however, well acquainted with the principles of this science, would find 
no difficulty in arriving at the same conclusions. 

The time is not distant when not only writers on finance, but on history 
and geography, will be required to possess a knowledge of at least the fun- 
damental principles of political economy. A modern treatise on Universal 
Geography, (vol. 2, page 602) a work in other respects denoting extensive 
research and information, contains the following passage : " The number 
of inhabitants of a comitry is the basis of every good system of finance; the 
more numerous is its population, the greater height will its commerce and 
manufactures attain; and the extent of its military force be in proportion 
to the amount of its population." Unfortunately every one of these posi- 
tions may be erroneous. National revenue, necessarily consisting eitlier of 



xlii INTRODUCTIOK. 

By the exclusive restriction of the term ivealth to values fixed 
and realized in material substances, Dr. Smith has narrowed the 
boundary of this science. He should also have included under 
it values which, although immaterial, are not less real, such as 
natural or acquired talents. Of two individuals equally destitute 
of fortune, the one in possession of a particular talent is by no 
means so poor as the other. Whoever has acquired a particular 
talent at the expense of an annual sacrifice, enjoys an accumu- 
lated capital ; a description of wealth, notwithstanding its imma- 
teriality, so little imaginary, that, in the shape of professional 
services, it is daily exchanged for gold and silver. 

Dr. Smith, who with so much sagacity unfolds the manner in 
which production takes place, and the peculiar circumstances 
accompanying it in agriculture and the arts, on the subject of 
commercial production presents us with only obscure and indis- 
tinct notions. He, accordingly, was unable to point out with 
precision, the reason why, and the extent to which, facilities of 
communication are conducive to production. 

He did not subject to a rigid analysis the different operations 
comprehended under the general name of industry, or as he calls 
it, of labour, and, therefore, could not appreciate the peculiar im- 
portance of each in the business of production. 

His work does not furnish a satisfactory or well connected 
account of the manner in which wealth is distributed in society; 
a branch of political economy, it may be remarked, opening an 
almost new field for cultivation. The too imperfect views of 
economical writers respecting the production of wealth preclud- 
ed them from forming any accurate notions in relation to its dis- 
tribution.* 

Finally, although the phenomena of the consumption of wealth 
are but the counterpart of its production, and although Dr. 
Smith's doctrine leads to its correct examination, he did not him- 
self develop it; which precluded him from establishing numer- 
ous important truths. Thus, by not characterizing the two dif- 
ferent kinds of consumption, namely, unproductive and repro- 
ductive, he does not satisfactorily demonstrate, that the con- 

the income of the public property, or of the contributions, in the shape of 
taxes, drawn from the incomes of individuals, does not depend upon the num- 
ber, but upon the wealth, and above all upon the incomes of the people. 
Now, an indigent multitude has the fewer contributions to yield, the more 
mouths it has to feed. It is not the numerical population of a state, but the 
capital and genius of its inhabitants, that most coiiduces to the advancement 
of its commerce ; these benefit population much more than they are benefit- 
ed by it. Finally, the number of troops a government can maintain de- 
pends still less upon the extent of its population than upon its revenues; and 
it has been already seen tjiat revenue is not dependent upon population. 

* Witness Turgofs Reflections sur la formation etla distribution des rich- 
esses, in which he has introduced various views on both these subjects, 
either entirely erroneous, or very imperfect. 



INTRODUCTION. xliu 

sumption of values saved and accumulated in order to" form ca- 
pital, is as perfect as the consumption of values which are dissi- 
pated. The better we become acquainted with political econo- 
my, the more correctly shall we appreciate the importance of 
the improvements this science has received from him, as well 
as of those he left to be accomplished.* 

Such are the principal imperfections the Inquiry into the Na- 
ture and Causes of the Wealth of Nations contains, in relation to 
its fundamental doctrines. The plan of the work, or, in other 
words, the manner in which these doctrines are unfolded, is lia- 
ble to no less weighty objections. 

In many places the author is deficient in perspicuity, and al- 
most throughout is destitute of method. To understand him 
thoroughly, it is necessary to accustom one's self to collect and 
digest his views; a labour, at least in respect to some passages, 
he has placed beyond the reach of most readers; indeed, so 
much so, that persons otherwise enlightened, professing both to 
comprehend and admire them, have written on subjects he has 
discussed, namely, on taxes and bank notes as supplementary to 
money, without having understood any part of his theory on 
these points, which, nevertheless, forms one of the most beauti- 
ful portions of his inquiry. 

His fundamental principles are not established in the chapters 
assigned to their development. Many of them will be found 
scattered through the two excellent refutations of the exclusive 
or mercantile system and the system of the economists, but in no 
other parts of the work. The principles relating to the real and 
nominal prices of tilings, are introduced into a dissertation on 
the value of the precious metals during the course of the last 
four centuries ; and the author's opinions on the subject of mo- 
ney are contained in the chapter on commercial treaties. 

Dr. Smith's long digressions have, moreover, with great pro- 
priety, been much censured. An historical account of a parti- 
cular law or institution, as a collection of facts, is in itself, doubt- 
less, highly interesting, but in a work devoted to the support and 
illustration of general principles, particular facts not exclusive- 
ly applicable to these ends, can only unnecessarily overload the 
attention. His sketch of the progress of opulence in the differ- 
ent nations of Europe after the fall of the Roman empire, is but 
a magnificent digression. The same remark is applicable to the 
highly ingenious disquisition on public education, replete as it is 
with erudition and sound philosophy, at the same time that it 
abounds with valuable instruction. 

Sometimes these dissertations have but a very remote connex- 
ion with his subject. In treating of public expenditures, he has 

* Many other points of doctrine, besides those here noticed, have been 
either overlooked or but imperfectly analysed by Dr. Smith. 

7 



xliv INTRODUCTION. 

gone into a very curious history of the various modes in which 
war was carried on by different nations at different epochs; in 
this manner accounting for military successes which have had so 
decided an influence on the civiUzation of many parts of the 
earth. These long digressions at times, also, are devoid of in- 
terest to every other people but the English. Of this descrip- 
tion is the long statement of the advantages Great Britain would 
derive from the admission of all of her colonies into the right of 
representation in parliament. 

The excellence of a literary composition as much depends 
upon what it does not, as upon what it does contain. So many 
details, although in themselves useful, unnecessarily incumber 
a work designed, to unfold the principles of political economy. 
Bacon made us sensible of the emptiness of the Aristotelian phi- 
losophy; Smith, in like manner, caused us to perceive the falla- 
ciousness of all the previous systems of political economy; but 
the latter no more raised the superstructure of this science, than 
the former created logic. To both, however, our obligations are 
sufficiently great, for having deprived their successors of the de- 
plorable possibility of proceeding, for any length of time, with 
success on an improper route.* 

We are not, however, yet in possession of an established text- 
book on the science of political economy, in which the fruits of 
an enlarged and accurate observation are referred to general 
principles, that might be admitted by every reflecting mind; a 
work in which these results are so complete and well arranged, 
as to afford to each other mutual support, and that might every 
where, and at all times, be studied with advantage. To prepare 
myself for undertaking such a useful task, I have thought it ne- 
cessary attentively to study what had been previously written on 
the same subject, and afterwards to forget it: to prosecute this 
investigation, that I might profit by the experience of the many 
competent inquirers who have preceded me; to endeavour to 
obliterate its impressions, not to be misled by any system; and 
at all times be enabled freely to consult the nature and course 
of things, as actually existing in society. Having no particular 

* Since the time of Dr. Smith, both in England and France, a variety of 
publications on political economy have made their appearance; some of 
considerable length, but seldom containing any thing worthy of preserva- 
tion. The greater part of them are of a controversial character, in which 
the principles of the science are merely laid down for the purpose of main- 
taining a favourite hypothesis ; but from which, nevertheless, many impor- 
tant facts, and even sound principles, when they coincide with the views of 
their authors, may be collected. The " Essai sur les finances de la Grand- 
Bretagne," by Gentz, an apology for Mr. Pitt's system of finance, is of this 
description; so also is Thornton'' s Inquiry into the nature and effects of paper 
credit, written with a view to justify the suspension of cash payments by 
the bank of England ; as well as a great number of other works on the same 
subject, and in relation to the corn laws. 



INTRODUCTION. xlv 

hypothesis to support, I have been simply desirous of unfolding 
the manner in which wealth is produced, distributed, and con- 
sumed. A knowledge of these facts could only be acquired by 
observing them. It is the result of these observations, within 
the reach of every inquirer, that are here given. The correct- 
ness of the general conclusions I have deduced from them, every 
one can judge of. 

It was but reasonable to expect from the lights of the age, 
and from that method of philosophizing which has so powerfully 
contributed to the advancement of other sciences, that I might 
at all times be able to ascend to the nature of things, and never 
lay down an abstract principle that was not immediately applica- 
ble in practice; so that, always compared with well established 
facts, any one could easily find its confirmation by at the same 
time discovering its utihty. 

Nor was this all. Solid general principles, previously laid 
down, must be noticed, and briefly but clearly proved; those 
which had not been laid down must be established, and the 
whole so combined, as to satisfy us, that no material omission 
has taken place, nOr any fundamental point been overlooked. 
The science must be stript of many false opinions ; but this la- 
bour must be confined to such errors as are generally received, 
and to authors of acknowledged reputation. For what injury 
can an obscure writer or a discredited dogma effect? The ut- 
most precision must be given to the phraseology we employ, so 
as to prevent the same word from ever being understood in two 
different senses ; and all problems be reduced to their simplest 
elements, in order to facilitate the detection of any errors, and 
above all of our own. In fine, the doctrines of the science must^ 
be conveyed in such a popular* form, that every man of sound 
understanding may be enabled to comprehend them in their 
whole scope and consequences, and apply their principles to ail 
the various circumstances of life. 

The position maintained in this work, that the value of things 
is the measure of weahh, has been especially objected to. This, 
perhaps, has been my fault; I should have taken care not to be 
misunderstood. The only satisfactory reply I can make to the 
objection, is to endeavour to give more perspicuity to this doc- 
trine. I must, therefore, apologize to the owners of the former 
editions for the numerous corrections I have made in the present. 
It became my duty in treating a subject of such essential import- 
ance to the general welfare, to give it all the perfection within 
my reach. 

* By a popular treatise, I do not mean a treatise for the use of persons, 
who neither know how to read, nor to make any use of it. By this expres- 
sion, I mean a treatise not exclusively addressed to professional or scientific 
cultivators of this particular branch of knowledge ; but one calculated to be 
read by every intelligent and useful member of society. 



Xlvi INTRODUCTION. 

Since the publications of the former editions of this work, va- 
rious authors, some of whom enjoy a well merited celebrity,* 
have given to the world new treatises on political economy. It 
is not my province, either to pronounce upon the general charac- 
ter of these productions, or to decide whether they do, or do not, 
contain a full, Clear and well digested exposition of the funda- 
mental principles of this science. This much I can with sinceri- 
ty say, that many of these works contain truths and illustrations 
well calculated greatly to advance the science, and from the pe- 
rusal of which I have derived important benefit. But, in com- 
mon with every other inquirer, I am entitled to remark how far 
some of their principles, which at first sight appear to be plausi- 
ble, are contradicted by a more cautious and rigid induction of 
facts. 

It is, perhaps, a well founded objection to Mr. Ricardo, that 
he sometimes reasons upon abstract principles to which he gives 
too great a generahzation. When once fixed in an hypothesis 
which can not be assailed, from its being founded upon observa-. 
tions not called in question, he pushes his reasonings to their 
remotest consequences, without comparing their results with 
those of actual experience. In this respect resembling a philo- 
sophical mechanician, who, from undoubted proofs drawn from 
the nature of the lever, would demonstrate the impossibility of 
the vaults daily executed by dancers on the stage. And how does 
this happen? The reasoning proceeds in a straight line; but a 
vital force, often unperceived, and always inappreciable, makes 
the facts differ very far from our calculations. From that instant 
nothing in the author's work is represented as it really occurs in 
nature. It is not sufiicient to set out from facts; they must be 
brought together, steadily pursued, and the consequences drawn 
from them constantly compared with the effects observed. The 
science of political economy, to be of practical utility, should not 
teach, what must necessarily take place, if even deduced by legi- 
timate reasoning, and from undoubted premises ; it ought to 
show, in what manner that which in reality does take place, is 
the consequence of another fact equally certain. It should as- 
certain the chain which binds them together, and always estab- 
lish from observation the existence of the two links at their point 
qf connexion. 

With respect to the wild or antiquated theories, so often pro- 
duced or reproduced by authors who possess neither sufficiently 
extensive nor well digested information to entitle them to form 

* Ricardo, Sismondi, and others. The fair sex begin also to perceive that 
they had done themselves injustice, in supposing that they were unequal 
to a branch of study destined to exercise so benign an influence over do- 
mestic happiness. In England, a lady (Mrs. Marcet) has published a work, 
"Conversations on Political Economy" since translated into French; in 
which the soundest principles are explained in a familiar and pleasing style» 



INTRODUCTION. xlVM 

a sound judgment, the most effectual method of refuting them is 
to display the true doctrines of the science with still greater 
clearness, and to leave to time the care of disseminating them. 
We otherwise should be involved in interminable controversies, 
affording no instruction to the enlightened part of society, and 
inducing the uninformed to believe that nothing is susceptible of 
proof, inasmuch as every thing is made the subject of argument 
and disputation. 

Disputants, infected with every kind of prejudice, have with 
a sort of doctorial confidence remarked, that both nations and 
individuals sufficiently well understand how to improve their for- 
tunes without any knowledge of the nature of wealth, and that 
this knowledge is in itself a purely speculative and useless in- 
quiry. This is but saying that we know perfectly well how to 
live and breathe, without any knowledge of anatomy and physio- 
logy, and that these sciences are therefore superfluous. Such a 
proposition would not be tenable ; but what should we say if it 
were maintained, and by a class of doctors too, who, whilst de- 
crying the science of medicine, should themselves subject you 
to a treatment founded upon antiquated empiricism and the 
most absurd prejudices; who rejecting all regular and systematic 
instruction, in spite of your remonstrances, should perform upon 
your own body the most bloody experiments; and whose orders 
should be enforced with the weight and solemnity of laws, and, 
finally, carried into execution by a host of clerks and soldiers? 

In support of antiquated errors it has, also, been said, " that 
there surely must be some foundations for opinions, so generally 
embraced by all mankind; and that we ourselves ought rather 
to call in question the observations and reasonings which over- 
turn what has been hitherto so uniformly maintained and ac- 
quiesced in by so many individuals, distinguished alike by their 
wisdom and benevolence." Such reasoning, it must be acknow- 
ledged, should make a profound impression on our minds, and 
even cast some doubts on the most incontrovertible positions, 
had we not alternately seen the falsest hypotheses, now univer- 
sally recognised as such, every where received and taught dur- 
ing a long succession of ages. It is yet but a very little time, 
since the rudest as well as the most refined nations, and all man- 
kind, from the unlettered peasant to the enlightened philosopher, 
believed in the existence of but four material elements. No hu- 
man being had even dreamt of disputing a doctrine, which is 
nevertheless false; insomuch, that a tyro in natural philosophy, 
who should at present consider earth, air, fire, and water as dis- 
tinct elements, would be disgraced.* How many other opinions, 

* Every branch of knowledge, even the most important, is but of very re- 
cent origin. The celebrated writer on agriculture, Arthur Young, after 
having bestowed uncommon pains in the collection of all the observations 
that had been made in relation to soils, one of the most important parts of 



xlviii INTRODUCTION. 

as universally prevailing and as much respected, will in like man- 
ner pass away. There is something epidemical in the opinions 
of mankind; they are subject to be attacked by moral maladies 
which infect the whole species. Periods at length arrive when, 
like the plague, the disease wears itself out and loses all its ma- 
lignity; but it still has required time. The entrails of the vic- 
tims were consulted at Rome three hundred years after Cicero 
had remarked, that the two augurs could no longer examine them 
without laughter. 

The contemplation of this successive fluctuation of opinions 
must not, however, inspire us with a belief that nothing is to be 
admitted as certain, and thus induce us to yield up to universal 
scepticism. Facts repeatedly observed by individuals in a situa- 
tion to examine them under all their aspects, when once well 
established and accurately described, can no longer be consider- 
ed as mere opinions, but must be received as positive truths. 
When it was demonstrated, that all bodies are expanded by heat, 
this truth could no longer be called in question. Moral and po- 
litical science present truths equally indisputable, but of more 
difficult solution. In these sciences, every individual considers 
himself not only as being entitled to make discoveries, but as be- 
ing also authorized to pronounce u-pon the discoveries of others ; 
yet how few persons acquire competent knowledge, and views 
sufficiently enlarged, to become assured that the subject upon 
which they thus venture to pronounce judgment, is thoroughly 
understood by them in all its bearings. In society, one is asto- 
nished to find the most abstruse questions as quickly decided as 
if every circumstance, which, in any way, could and ought to 
affect the decision, were known. What would be said of a party 
passing rapidly in front of a large castle, that should undertake 
to give an account of every thing that is going on within? 

Certain individuals, whose minds have never caught a glimpse 
of a more improved state of society, boldly affirm that it could 
not exist ; they acquiesce in established evils, and console them- 
selves for their existence by remarking, that they could not pos- 
sibly be otherwise; in this respect reminding us of that emperor 
of Japan who thought he would have suffocated with laughter, 
upon being told that the Dutch had no king. The Iroquois were 
at a loss to conceive how wars could be carried on with success, 
if prisoners were not to be burnt. 

Although, to all appearance, many European nations may be 
in a very flourishing condition, and some of them annually ex- 
pend from one to two hundred millions of dollars solely for the 

this science, and which teaches us hy what succession of crops the earth 
may be at all times and with the greatest success cultivated, remarked, that 
he could not find that any thing had been written on this subject prior to 
the year 1768. Other arts, not less essential to the happiness and prosperi- 
ty of society, are still also in their infancy. 



INTRODUCTION. xUx 

support of government, it must not thence be inferred that their 
situation leaves nothing to be desired. A rich Sybarite, resid- 
ing according to his inchnation either at his castle in the country 
or in his palace in the metropolis, in both, at an enormous ex- 
pense, partaking of every luxury that sensuality can devise, trans- 
porting himself with the utmost rapidity and comfort in whatever 
direction new pleasures invite him, engrossing the industry and 
talents of a multitude of retainers and servants, and killing a 
dozen horses to gratify a whim, may be of opinion that things go 
on sufficiently well, and that the science of political economy is 
not susceptible of any further improvement. But in the coun- 
tries said to be in a flourishing condition, how many human be- 
ings can be enumerated, in a situation to partake of such enjoy- 
ments? One out of a hundred thousand at most; and out of a 
thousand, perhaps not one who may be permitted to enjoy what is 
called a comfortable independence. The haggardness of po- 
verty is everywhere seen contrasted with the sleekness of wealth, 
the extorted labour of some compensating for the idleness of 
others, wretched hovels by the side of stately colonnades, the 
rags of indigence blended with the ensigns of opulence ; in a 
word, the most useless profusion in the midst of the most urgent 
wants. 

Persons, who under a vicious order of things have obtained a 
competent share of social enjoyments, are never in want of ar- 
guments to justify to the eye of reason such a state of society; 
for what may not admit of apology when exhibited in but one 
point of view? If the same individuals were to-morrow required 
to cast anew the lots assigning them a place in society, they 
would find many things to object to. 

Accordingly, opinions in political economy are not only main- 
tained by vanity, the most universal of human infirmities, but by 
self interest, unquestionably not less so; and which, without our 
knowledge, and in spite of ourselves, exercises a powerful in- 
fluence over our mode of thinking. Hence, the sharp and sour 
intolerance by which truth has been so often alarmed and obliged 
to retire; or which, when she is armed with courage, encom- 
passes her with disgrace, and sometimes with persecution. 
Knowledge is at present so very generally diffused, that a philo- 
sopher may assert, without the risk of contradiction, that the 
laws of nature are the same in a world and in an atom; but a 
statesman who should venture to affirm, that there is a perfect 
analogy between the finances of a nation and those of an indivi- 
dual, and that the same principles of economy should regulate the 
management of the affairs of both, would have to encounter the 
clamours of various classes of society, and to refute ten or a do- 
zen different systems. 

Nor is this all. Writers are found who possess the lamentable 
facility of composing articles for journals, pamphlets, and even 



1 INTRODUCTION. 

whole volumes upon subjects which, according to their own con- 
fession, they do not understand. And what is the consequence'? 
The science is involved in the clouds of their own minds, and 
that is rendered obscure which was becoming clear. Such is the 
indifference of the public, that they rather prefer trusting to as- 
sertions, than be at the trouble of investigating them. Sometimes, 
moreover, a display of figures and calculations imposes upon 
them ; as if numerical calculations alone could prove any thing, 
and as if any rule could be laid down, from which an inference 
could be drawn, without the aid of sound reasoning. 

These are among the causes which have retarded the progress 
of political economy. 

Every thing, however, announces that this beautiful, and 
above all, useful science is spreading itself with increasing ra- 
pidity. Since it has been perceived, that it does not rest upon 
hypothesis, but is founded upon observation and experience, its 
importance has been felt. It is now taught wherever knowledge 
is cherished. In the universities of Germany, of Scotland, of 
Spain, of Italy, and of the north of Europe, professorships of 
political economy are already established. Hereafter this science 
will be taught in them, with all the advantages of a regular and 
systematic study. Whilst the university of Oxford proceeds in 
her old and beaten track,* within a few years that of Cambridge 
has established a chair for the purpose of imparting instruction 
in this new science. Courses of lectures are dehvered in Geneva 
and various other places ; and the merchants of Barcelona have, 
at their own expense, founded a professorship on political eco- 
nomy. It is now considered as forming an essential part of the 
education of princes ; and those who are worthy of that high dis- 
tinction blush at being ignorant of its principles. The emperor 
of Russia has desired his brothers, the grand dukes Nicholasf and 
Michael, to pursue a course of study on this subject under the 
direction of M. Storch. Finally, the government of France has 
done itself lasting honour by estabhshing in this kingdom, under 
the sanction of pubhc authority, the first professorship of political 
economy. 

When the youths who are now students, shall be scattered 
through all the various classes of society, and elevated to the 
principal posts under government, public affairs - will be con- 
ducted in a much better manner than they hitherto have been. 
Princes as well as people, becoming more enlightened as to 
their true interests, will perceive that these interests are not at 

*In the year 1826, a professorship of political economy was founded at 
the university of Oxford, and a highly able and instructive course of lec- 
tures has since been delivered before that university, by Nassau William 
Senior, A. M. the first professor of political economy. We have rarely read a 
more masterly and entertaining performance than the professor's discussion 
of the mercantile theory of wealth, which occupies three of his lectures. 

t The present emperor Nicholas. 



INTRODUCTION. % 

variance with each other ; which on the one side will naturally 
induce less oppression and on the other beget more confidence. 

At present, authors who venture to write upon politics, his- 
tory, and a fortiori upon finance, commerce and the arts, without 
any previous knowledge of the principles of political economy, 
only produce works of temporary success, that do not succeed 
in fixing public attention. 

But what has chiefly contributed to the advancement of poli- 
tical economy, is the grave posture of affairs in the civilized 
world during the last thirty years. The expenses of govern- 
ments have risen to a scandalous height; the appeals which they 
have been obliged to make to their subjects in order to relieve 
their exigencies, have disclosed to them their own importance. 
A concurrence of public sentiment, or at least the semblance of it, 
has been almost every where called for, if not brought about. The 
enormous contributions drawn from the people, under pretexts 
more or less specious, not even having been found sufficient, re- 
course has been had to loans ; and to obtain credit it became 
necessary for governments to disclose their wants as well as 
their resources. Accordingly, the publicity of the national ac- 
counts, and the necessity of vindicating to the world the acts of 
the administration, have in the science of politics produced a 
moral revolution, whose course can no longer be impeded. 

The disorders and calamities incident to the same period, have 
also produced some important experiments. The abuse of paper 
money, commercial and other restrictions, have made us feel the 
ultimate effects of almost all excesses. And the sudden over- 
throw of the most imposing bulwarks of society, the gigantic in- 
vasions, the destruction of old governments and the creation of 
new, the formation of rising empires in another hemisphere, the 
colonies that have become independent, the general impulse 
given to the human mind, so favourable to the development of 
all its faculties, and the great expectations and the great mis- 
takes, have all undoubtedly very much enlarged our views ; at 
first operating upon men of calm observation and reflection, and 
subsequently upon all mankind. 

It is to the facility of tracing the links in the chain of causes 
and effects that we must ascribe the great improvement in the 
kindred branches of moral and poHtical science ; and hence it is, 
when once the manner in which political and economical facts 
bear upon each other is well understood, that we are enabled to 
decide what course of conduct will be most advantageous in any 
given situation. Thus, for example, to get rid of mendicity, that 
will not be done which only tends to multiply paupers ; and, in 
order to procure abundance, the only measures calculated to 
prevent it will not be adopted. The certain road to nation- 
al prosperity and happiness being known, it can and will be 
chosen. 

8 



lii , INTRODUCTION. 

For a long time it was thought, that the science of political 
economy could only possibly be useful to the very limited num- 
ber of persons engaged in the administration of public affairs. It 
is undoubtedly of importance that men in public life should be 
more enlightened than others ; in private life, the mistakes of in- 
dividuals can never ruin but a small number of families, whilst 
those of princes and ministers spread desolation over a whole 
country. But, is it possible for princes and ministers to be en- 
lightened, when private individuals are not so 1 This is a ques- 
tion that merits consideration. It is in the middling classes of so- 
ciety, equally secure from the intoxication of power and the com- 
pulsory labour of indigence, in which are found moderate for- 
tunes, leisure united with habits of industry, the free intercourse 
of friendship, a taste for literature and the ability to travel, that 
knowledge originates, and is disseminated amongst the highest 
and lowest orders of the people. For these latter classes, not 
having the leisure necessary for meditation, only adopt truths 
when presented to them in the form of axioms, requiring no fur- 
ther demonstration. 

And although a monarch and his principal ministers should 
be well acquainted with the principles upon which national pros- 
perity is founded, of what advantage would this knowledge be to 
them, if throughout all the different departments of administration, 
their measures were not supported by men capable of compre- 
hending and enforcing them 1 The prosperity of a city or pro- 
vince is sometimes dependent upon the official acts of a single 
individual ; and the head of a subordinate department of govern- 
ment, by provoking an important decision, often exercises an 
influence even superior to that of the legislator himself. In 
countries blessed with a representative form of government, each 
citizen is under a much greater obligation to make himself ac- 
quainted with the principles of political economy; for there every 
man is called upon to deliberate upon public affairs. 

Finally, in supposing that every person in any way connected 
with government, from the highest to the lowest, could be well 
acquainted with these principles, without the nation at large being 
so, which is wholly improbable, what resistance would not the 
execution of their wisest plans experience? What obstacles 
would they not encounter in the prejudices of those even, who 
should most favour their measures ? 

A nation, in order to enjoy the advantages of a good system of 
pohtical economy, must not only possess statesmen capable of 
adopting the best plans, but the population must be in a situation 
to admit of their application.* 

* I here suppose the higher orders of society to be actuated by a sincere 
desire to promote the public good. When this feeling, however, does not 
exist, when the government is faithless and corrupt, it is of still greater im- 
portance that the people should become acquainted with the real state of 



INTRODUCTION. 



liii 



It is also the way of avoiding doubts and perpetual changes of 
principles, which prevents our profiting even from whatever may- 
be good in a bad system. A steady and consistent policy is an 
essential element of national prosperity ; thus England has be- 
come more opulent and powerful than would seem to comport 
with her territorial extent, by an uniform and steadfast adherence 
to a system, even in many respects objectionable to her, of mo- 
nopolizing the maritime commerce of other nations. But to fol- 
low for any length of time the same route, it is necessary to be 
able to choose one not altogether bad ; unforeseen and insur- 
mountable difficulties would otherwise have to be encountered, 
which would obhge us to change our course, without even the 
reproach of versatility. 

It is, perhaps, to this cause that we must attribute the evils 
which, for two centuries, have tormented France; a period during 
which she was within reach of the high state of prosperity she 
was invited to by the fertility of her soil, her geographical posi- 
tion and the genius of her inhabitants. With no fixed opinions 
in relation to the causes of public prosperity, the nation, like a 
ship without chart or compass, was driven about by the caprice 
of the winds and the folly of the pilot, alike ignorant of the place 
of her departure or destination.* A consistent policy in France 
would have extended its influence over many successive adminis- 
trations; and the vessel of the state would at least not have been 
in danger of being wrecked, or exposed to the awkward mancBU- 
vres by which she has so much suffered. 

Versatility is attended svith such ruinous consequences, that it 
is impossible to pass even from a bad to a good system without 
serious inconvenience. The exclusive and restrictive system is 
without doubt vastly injurious to the development of industry and 
to the progress of national wealth ; nevertheless, the establish- 
ments which this policy has created could not be suddenly sup- 
pressed, without causing great distress. | A more favourable 
state of things can only be brought about, without any inconve- 

tliings, and comprehend their true interests. Otherwise, they suffer without 
knowing- to what causes their distresses ought to be attributed; or, indeed, 
by attributing tliem to erroneous causes, the views of tJie public are distract- 
ed, their efforts disunited, and individuals, thus deprived of general support, 
fail in resolution, and despotism is strengthened; or, what is still worse, 
where the people are so badly governed as to become desperate, they listen 
to pernicious counsels, and exchange a vicious order of things for one still 
worse. 

* In how many instances have not great pains been taken and considerable 
capital expended to increase the evils mankind have been desirous of shun- 
ning. How many regulations are just so far carried into execution as to pro- 
duce all the injury restrictions possibl}' can effect, and, at the same time, just 
as far violated as to retain all the inconveniences arising from their infringe- 
ment? 

tTliis arises from our not being able, without serious losses, to displace 
the capital and talents, which, owing to an erroneous system, have received 
a faulty direction. 



liv INTRODUCTION. 

nience, by tlie gradual adoption of measures introduced with infi- 
nite skill and care. A traveller whose limbs have been frozen in 
traversing the Arctic regions, can only be preserved from the 
dangers of a too sudden cure and restored to entire health, by 
the most cautious and imperceptible remedies. 

The soundest principles are not at all times applicable. The 
essential object is to know them, and then such as are applicable 
or desirable can be adopted. There can be no doubt that a new 
community, which in every instance should consult them, would 
rapidly reach the highest pitch of opulence; but every nation may, 
nevertheless, in many respects violate them and yet attain a sa- 
tisfactory state of prosperity. The powerful action of the vital 
principle causes the human body to grow and thrive in spite of 
the accidents and excesses of youth, or of the wounds which 
have been inflicted on it. Absolute perfection, beyond which all 
is evil and produces only evil, is no where found ; evil is every 
where mixed with good. When the former preponderates, so- 
ciety declines; when the latter, it advances with more or less ra- 
pidity in the road of prosperity. Nothing, therefore, ought to 
discourage our efforts towards the acquisition and dissemination 
of sound principles. The least step taken towards the attainment 
of this knowledge is immediately productive of some good, and 
ultimately will yield the happiest fruits. 

If, for the interest of the state, it is important that individuals 
should know what are the true principles of political economy, 
who will venture to maintain that the same knowledge will be 
useless to them in the management of their own private concerns'? 
That money is readily earned without any knowledge of the na- 
ture or origin of wealth, 1 admit. For that purpose, a very sim- 
ple calculation, within the reach of the rudest peasant, is all that 
is necessary : such an article icill, including every expense, cost me 
so much ; I shall sell it for so much, and, therefore, shall gain so 
much. Nevertheless, accurate ideas respecting the nature and 
growth of wealth, unquestionably afford us many advantages in 
forming a sound judgment of enterprises in which we are interest- 
ed, either as principals or as parties. They enable us to foresee 
what these enterprises will require, and what will be their results; 
to devise the means of their success and to establish our exclu- 
sive claims to them; to select the most secure investments, from 
anticipating the effects of loans and other public measures ; to 
cultivate the earth to advantage, from accurately adjusting actual 
advances with probable returns ; to become acquainted with the 
general wants of society, and thus be enabled to make choice of 
a profession ; and to discern the symptoms of national pros- 
perity or decline. 

The opinion that the study of the science of political economy 
is calculated to be useful to statesmen only, fallacious as it is, 
has been attended with other disadvantages. Almost all the au- 
thors on this subject, until the time of Dr. Adam Smith, had 



INTRODUCTION. , W 

imagined that their principal object was to enlighten the public 
authoTities ; and as they were far from agreeing among them- 
selves, inasmuch as the facts and their connexion and conse- 
quences were but imperfectly known to them, and entirely over- 
looked by the multitude, it is by no means surprising that they 
should have been regarded as visionary dreamers in relation to 
the public good. Hence the contempt which men in power always 
affect towards every thing like first principles. 

But since the rigorous method of philosophizing, which in every 
other branch of knowledge leads to truth, has been applied to the 
investigation of facts, and to the reasonings founded on them, and 
the science of political economy has been thus confined to a sim- 
ple exposition of whatever takes place in relation to wealth, it no 
longer attempts to offer counsel to public authorities. Should 
they, however, be desirous of ascertaining the good or evil con- 
sequences likely to result from any favourite project, they may 
consult this science, exactly as they would consult hydraulics 
upon the construction of a pump or sluice. All that can be re- 
quired from political economy is to furnish governments with a 
correct representation of the nature of things, and the general 
laws necessarily resulting from it. Perhaps, until such views 
be more generally diffused, it may also be required, to point out 
to them some of the applications of its principles. Should these 
be despised or neglected, the governments themselves, as well 
as the people, will be the sufferers. The husbandman who sows 
tares can never expect to reap wheat. 

Certainly, if political economy discloses the sources of wealth, 
points out the means of rendering it more abundant, and teaches 
the art of daily obtaining a still greater amount without ever exf 
hausting it ; if it demonstrates, that the population of a country 
may, at the same time, be more numerous and better supplied with 
the necessaries of fife ; if it satisfactorily proves that the interest 
of the rich and poor, and of different nations, are not opposed to 
each other, and that all rivalships are mere folly ; and if from all 
these demonstrations it necessarily results, that a multitude of 
evils supposed to be without remedy may not only be said to be 
curable, but even easy to cure, and that we need not suffer from 
them any longer than we are willing so to do ; it must be acknow- 
ledged that there are few studies of greater importance, or more 
deserving the attention of an elevated and benevolent mind. 

Time is the great teacher, and nothing can supply its opera- 
tion. It alone can fully demonstrate the advantages to be deriv- 
ed from a knowledge of political economy in the general princi- 
ples of legislation and government. On the one hand, the cus- 
tom which condemns so many men of sense, at the same time 
that they admit the principles of this science, to speak and act as 
if they were wholly ignorant of them,* and on the other, the re- 

* " They would wish, so to express myself, that I might be able to demon- 
strate that my proofs are conclusive, and tliat they are not wrong in sub- 



Ivi INTRODUCTION. 

sistance, which individual as well as general interests, imperfect- 
ly understood, oppose to many of these principles, exhibit nothing 
that ought either to surprise or alarm individuals animated with 
a desire of promoting the general welfare. The philosophy of 
Newton, which during a period of fifty years was unanimously 
rejected in France, is now taught in all its schools. Ultimately 
it will be perceived, that there are studies of still greater import- 
ance than this ; if estimated by their influence on the happiness 
and prosperity of mankind. 

Still how unenlightened and ignorant are the very nations we 
term civilized ! Survey entire provinces of proud Europe ; inter- 
rogate a hundred, a thousand, or even ten thousand individuals, 
and of this whole number, you will hardly find two, perhaps but 
one, imbued with the slightest tincture of the improved science 
of which the present age so much boasts. This general ignorance 
of recondite truths is by no means so remarkable as an utter un- 
acquaintance with the simplest rudiments of knowledge, applicable 
to the situation and circumstances of every one. How rare also 
are the qualifications necessary for one's own instruction, and 
how few persons are solely capable of observing what daily hap- 
pens, and of questioning whatever they do not understand! 

The highest branches of knowledge are still very far from hav- 
ing yielded to society all the advantages to be expected from 
them, and without which they would be merely curious specula- 
tions. Perhaps their perfect application is reserved for the nine- 
teenth century. In moral as well as in physical science, inquirers 
of superior minds will appear, who, after having extended their 
theoretical views, will disclose methods of placing important 
truths within the reach of the humblest capacities. In the ordi- 
nary occurrences of life, instead of then being guided by the false 
lights of a transcendental philosophy, mankind will be governed 
by the maxims of common sense. Opinions will not rest on gra- 
tuitous assumptions, but be the result of an accurate observation 

mitting- to them. The soundness of my reasoning has produced a moment- 
ary conviction ; but they afterwards feel the habitual influence of their for- 
mer opinions return with undiminished authority, although without any ade- 
quate cause, as in the case of the apparent increase in the diameter of the 
moon at tlie horizon. They would wish to be freed by me from these trou- 
blesome relapses, of whose delusiveness thej' are sensible, but which never- 
theless importune them. In a word, they are desirous, that I should be enabled 
to effect by reason what time alone can accomplish ; which is impossible. 
Every cause has an efllect peculiar to itself Reason may convince, opinions 
carry us along, and illusions perplex us ; but time alone, and the frequent re- 
petition of the same acts, can produce that state of calmness and ease which 
we call habit. Hence it is, that all new opinions are such a length of time in 
spreading themselves. If an innovator has ever had immediate success, it is 
only from having discovered and promulgated opinions already floating in 
every mind." Destutt-Tracy, Logique, chap. 8. 



INTRODUCTION. IvU 

of the nature of things. Thus, habitually and naturally ascending 
to the source of all truth, we shall not suffer ourselves to be im- 
posed upon by empty sounds, or submit to the guidance of erro- 
neous impressions. Corruption, deprived of the weapons of em- 
piricism, will lose her principal strength, and be no longer able to 
obtain triumphs, calamitous to honest men and disastrous to 
nations. 



BOOK I. 

OF THE PRODUCTION OF WEALTH. 



CHAPTER I. 

■OP WHAT IS TO BE UNDERSTOOD BY THE TERM, PRODUCTION. 

If we take the pains to inquire what that is, which mankind 
in a social state of existence denominate wealth, we shall find 
the term employed to designate an indefinite quantity of objects 
bearing inherent value, as of land, of metal, of coin, of grain, of 
stuffs, of commodities of every description. When they further 
extend its signification to landed securities, bills, notes of hand, 
and the like, it is evidently because they contain obligations to 
deliver things possessed of inherent value. In point of fact, 
wealth can only exist where there are things possessed of real 
and intrinsic value. 

Wealth is proportionate to the quantum of that value ; great, 
when the aggregate of component value is great; small, when 
that aggregate is small. 

The value of a specific article is always vague and arbitrary, 
so long as it remains unacknowledged. Its owner is not a jot 
the richer, by setting a higher ratio upon it in his own estimation. 
But the moment that other persons are willing, for the purpose 
of obtaining it, to give in exchange a certain quantity of other 
articles, likewise bearing value, the one may then be said to 
be worth, or to be of equal value with, the other. 

The quantity of money, which is readily parted with to obtain 
a thing, is called its price. Current price, at a given time arid 
place, is that price which the owner is sure of obtaining for a 
thing, if he is inclined to part with it,* 

The knowledge of the real nature of wealth, thus defined, of 
the difficulties that must be surmounted in its attainment, of the 
course and order of its distribution amongst the members of so- 

* The numerous and diiScult points arising out of the confusion of positive 
and relative value are discussed in different parts of this work : particularly 
in the leading chapters of Book II. Not to perplex the attention of the 
reader, I confine myself here to so much, as is absolutely necessary to com- 
prehend the phenomenon of the production of wealth. 

9 



2 ON PRODUCTION. book i. 

clety, of the uses to which it may be applied, and, further, of the 
consequences resuUing respectively from these several circum- 
stances, constitutes that branch of science now entitled political 
economy. 

The value that mankind attach to objects originates in the use 
it can make of them. Some afford sustenance; others serve for 
clothing; some defend them from the inclemencies of the season, 
as houses; others gratify their taste, or, at all events, their vani- 
ty, both of which are species of wants : of this class are all mere 
ornaments and decorations. It is universally true, that, where 
men attribute value to any thing, it is in consideration of its use- 
ful properties: what is good for nothing they set no price upon.* 
To this inherent fitness or capability of certain things to satisfy 
the various wants of mankind, I shall take leave to affix the name 
of utility. And I will go on to say, that, to create objects which 
have any kind of utility, is to create wealth ; for the utihty of 
things is the ground-work of their value, and their value consti- 
tutes wealth. 

Objects, however, can not be created by human means; nor 
is the mass of matter, of which this globe consists, capable of 
increase or diminution. All that man can do is, to re-produce 
existing materials under another form, which may give them an 
utility they did not before possess, or merely enlarge one they 
may have before presented. So that, in fact, there is a creation, 
not of matter, but of utility; and this I call production of wealth. 

In this sense then, the word production must be understood in 
political economy, and throughout the whole course of the pre- 
sent work. Production is the creation, not of matter, but of uti- 
lity. It is not to be estimated by the length, the bulk, or the 
weight of the product, but by the utility it presents. 

Although price is the measure of the value of things, and their 
value the measure of their utility, it would be absurd to draw the 
inference, that, by forcibly raising their price, their utility can be 
augmented. Exchangeable value, or price, is an index of the 
recognised utility of a thing, so long only as human dealings are 
exempt from every influence but that of the identical utility: in 
like manner as a barometer denotes the weight of the atmos- 
phere, only while the mercury is submitted to the exclusive ac- 
tion of atmospheric gravity. 

In fact, when one man sells any product to another, he sells 

* It would be out of place here to examine, whether or no the value man- 
kind attach to a thing be always proportionate to its actual utility. The 
accuracy of the estimate must depend upon the comparative judgment, in- 
telligence, habits, and prejudices of those who make it. True morality, and 
the clear perception of their real interests, lead mankind to the just appre- 
ciation ofbeneflts. Political economy takes this appreciation as it finds it — 
as one of the data of its reasonings; leaving to the moralist and the practi- 
cal man, the several duties of enlightening and of guiding their fellow crea- 
tures, as well in this, as in other particulars of human conduct. 



CHAP. I. ON PRODUCTION. 3 

him the utility vested in that product: the buyer buys it only for 
the sake of its utility, of the use he can make of it. If, by any 
cause whatever, the buyer is obliged to pay more than the value 
to himself of that utility, he pays for value that has no existence, 
and consequently which he does not receive.* 

This is precisely the case, when authority grants to a particu- 
lar class of merchants the exclusive privilege of carrying on a 
certain branch of trade, the India trade for instance; the price 
of Indian imports is thereby raised, without any accession to 
their utility or intrinsic value. This excess of price is nothing 
more or less than so much money transferred from the pockets 
of the consumers into those of the privileged traders, whereby 
the latter are enriched exactly as much as the former are unne- 
cessarily impoverished. In like manner, when a government 
imposes on wine a tax, which raises to 15 sous the bottle what 
would otherwise be sold for 10 sous, what does it else, but trans- 
fer 5 sous per bottle from the hands of the producers or the con- 
sumers of wine to those of the tax-gathererlf The particular 
commodity is here only the means resorted to for getting at the 
tax-payer with more or less convenience; and its current value 
is composed of two ingredients, vis. 1. Its real value originating 
in its utility: 2. The value of the tax that the government 
thinks fit to exact, for permitting its manufacture, transport, or 
consumption. 

Wherefore, there is no actual production of wealth, without a 
creation or augmentation of utility. Let us see in what manner 
this utility is to be produced. 



CHAPTER II. 

OF THK DIFFERENT KINDS OF INDUSTRY AND THE MODE IN WHICH 
THEY CONCUR IN PRODUCTION. 

Some items of human consumption are the spontaneous gifts 
of nature, and require no exertion of man for their production; 
as air, water, and light, under certain circumstances. These are 
destitute of exchangeable value: because the want of them is 
never felt, others being equally provided with them as ourselves. 
Being neither procurable by production, nor destructible by con- 

* This position will hereafter be ftirther illustrated. For the present it 
is enough to know, that, whatever be the state of society, current prices ap- 
proximate to the real value of things, in proportion to the liberty of produc- 
tion and mutual dealing. 

t It will be shown in Book III. of this work, what proportion of the tax is 
paid by the producer, and what by the consumer. 



4 ON PRODUCTION. book i. 

sumption, they come not within the province of political eco- 
nomy. 

But there are abundance of others equally indispensable to our 
existence and to our happiness, which man would never enjoy at 
all, did not his industry awaken, assist, or complete the opera- 
tions of nature. Such are most of the articles which serve for 
his food, raiment and lodging. 

When that industry is hmited to the bare collection of natural 
products, it is called agricuUural industry, or simply agriculture. 

When it is employed in severing, compounding, or fashioning 
the products of nature, so as to fit them to the satisfaction of our 
various wants, it is called manufacturing indiistry.* 

When it is employed in placing within our reach objects of 
want, which would otherwise be beyond reach, it is called coni' 
mcrcial industry, or simply commerce. 

It is solely by means of industry that mankind can be furnish- 
ed, in any degree of abundance, with actual necessaries, and 
with that variety of other objects, the use of which, though not 
altogether indispensable, yet marks the distinction between a ci- 
vilized community, and a tribe of savages. Nature, left entirely 
to itself, would provide a very scanty subsistence to a small num- 
ber of human beings. Fertile but desert tracts have been found 
inadequate to the bare nourishment of a few wretches, cast upon 
them by the chances of shipwreck: while the presence of indus- 
try often exhibits the spectacle of a dense population plentifully 
supplied upon the most ungrateful soil. 

The term products is applied to things that industry furnishes 
to mankind. 

A particular product is rarely the fruit of one branch of indus- 
try exclusively. A table is a joint product of agricultural indus- 
try, which has felled the tree whereof it is made, and of manu- 
facturing industry, which has given it form. Europe is indebted 
for its colTee to the agricultural industry, which has planted, and 
cultivated the bean in Arabia or elsewhere, and to the commer- 
cial industry, which hands it over to the consumer. 

These three branches of industry, which may at pleasure be 
again infinitely subdivided, are uniform in their mode of contri- 
buting to the act of production. They all either confer an utility 
on a substance that possessed none before, or increase one which 
it already possessed. The husbandman who sows a grain of 
wheat that yields twenty-fold, does not gain this product from 
nothing: he avails himself of a powerful agent; that is to say, 
of Nature, and merely directs an operation, whereby different 
substances previously scattered throughout the elements of 

* Since matter can only be modified, compounded, or separated, by means 
either meclianical, or chemical, all branches of manufacturing industry may 
be subdivided into the meclianical and the chemical arts, according to the 
predominance of the one or the other in their several processes. 



CHAP. II. ON PRODUCTION. 5 

earth, air, and water, are converted into the form of grains of 
wheat. 

Gall-nuts, sulphat of iron, and gum-arabic, are substances ex- 
isting separately in nature. The joint industry of the merchant 
and manufacturer brings them together, and from their compound 
derives the black liquid, applied to the transmission of useful 
science. This joint operation of the merchant and manufacturer 
is analogous to that of the husbandman, who chooses his object 
and effects its attainment by precisely the same kind of means as 
the other two. 

No human being has the faculty of originally creating matter, 
which is more than nature itself can do. But any one may avail 
himself of the agents offered him by nature, to invest matter with 
utility. In fact, industry is nothing more or less than the human 
employment of natural agents; the most perfect product of la- 
bour, the one that derives nearly its whole value from its work- 
manship, is probably the result of the action of steel, a natural 
product, upon some substance or other, likewise a natural pro- 
duct.* 

Through ignorance of this principle, the economists of the 
18th century, though many enhghtened writers were to be reck- 
oned amongst them, were betrayed into the most serious errors. 
They allowed no industry to be productive, but that which pro- 
cured the raw materials ; as the industry of the husbandman, the 
fisherman, and the miner ; not adverting to the distinction, that 
wealth consists, not in matter, but in the value of matter ; be- 
cause matter without value is no item of wealth ; otherwise wa- 
ter, flint-stones, and dust of the roads, would be wealth. Where- 
fore, if the value of matter constitutes wealth, wealth is to be 
created by the annexation of value. Practically, the man who 
has in his warehouse a quintal of wool worked up into fine 
cloths, is richer than one who has the same quantity of wool in 
packs. 

To this position the economists replied, that the additional va- 
lue communicated to a product by manufacture, was no more 
than equivalent to the value consumed by the manufacturer dur- 
ing the process ; for, said they, the competition of manufactures 
prevents their ever raising the price beyond the bare amount of 
their own expenditure and consumption ; wherefore their labour 
adds nothing to the total wealth of the community, because their 

* Alagrotti in his Opuscula, by way of exemplifying- the prodigious addi- 
tion of value given to an object by industry, adduces the spinal springs that 
check the balance-wheels of watches. A poimd weight of pig-iron costs the 
operative manufacturer about five sous. This is worked up into steel, of 
which is made the little spring tliat moves the balance-wheel of a watch. 
Each of these springs weighs but the tenth part of a grain ; and, when com- 
pleted, maybe sold as high as eighteen /•/■.: so that out of a pound of iron, al- 
lowing something for loss of metal, 80,000 of these springs may be made, and 
a substance of five sows value be wrought into a value of 1,440,000/r. 



6 ON PRODUCTION. book i. 

wants on the one side destroy as much, as their industry pro- 
duces on the other. "j" 

But it should have been previously demonstrated by those 
who made use of this argument, that the value, consumed by 
mechanics and artizans, must of necessity barely equal the value 
produced by them, which is not the fact; for it is unquestiona- 
ble, that more savings are made, and more capital accumulated 
from the profits of trade and manufacture, than from those of 
agriculture. (1), 

Besides, even admitting that the profits of manufacturing in- 
dustry are consumed in the satisfaction of the necessary wants 
of the manufacturers and their families, that circumstance does 
not prevent them being positive acquisitions of wealth. For un- 
less they were so, they could not satisfy their wants: the profits 
of the land-owner and agriculturist are allowed to be items of po- 
sitive wealth; yet they are equally consumed in the maintenance 
of those classes. 

Commercial, in like manner as manufacturing industry, con- 
curs in production, by augmenting the value of a product by its 
transport from one place to another. A quintal of Brazil cotton 
has acquired greater utility and therefore larger value, by the- 
time it reaches a warehouse in Europe, than it possessed in one 
at Pernambuco. The transport is a modification that the trader 

t Mercier de la Riviere, in his work entitled, " Ordre Naturel des Societes 
Politiques" torn. ii. p. 255, while labouring to prove, that manufacturing' la- 
bour is barren and unproductive, makes use of an argument, which I think 
it may be of some service to refute, because it has been often repeated in dif- 
ferent shapes, and some of them specious enough. He says, " that if the 
unreal products of industry are considered as realities, it is a necessary in- 
ference, that an useless multiplication of workmanship is a multiplication 
of wealth." But because human labour is productive of value, when it has 
an useful result, it by no means follows, that it is productive of value, when 
its result is either useless or injurious. All labour is not productive ; but 
such only as adds a real value to any substance or thing. And the futility 
of this argument of the economists is put beyond all question by the cir- 
cumstance, that it may be equally employed against their own system and 
that of their opponents. They may be told, " You admit the industry of 
the cultivator to be productive; therefore he has only to plough and sow 
his fields ten times a-year to increase his productiveness ten-fold," which is 
absurd. 



(1) [Our author, in here asserting, " that more savings are made, and 
more capital accumulated from the profits of trade and manufactures, than 
from those of agriculture," has fallen into an error, which it is proper to 
notice. In the absence of prohibitions and restraints, the profits of agri- 
culture, manufactures and commerce, will all be on an equality, or always 
nearly approaching towards it ; for any material difference will cause a di- 
version of capital and industry to the more productive channel, and by that 
means restore the equilibrium. In overthrowing the hypothesis of tlie eco- 
nomists, the author has inadvertently, for a moment, lost sight of his own 
general principles which so clearly establish the equality of profits in all the 
different branches of industry.] American Editor. 



CHAP. 11. ON PRODUCTION. 7 

gives to the commodity, whereby he adapts to our use what was 
' not before available; which modification is equally useful, com- 
plex, and uncertain in the result, as any it derives from the other 
two branches of industry. He avails himself of the natural pro- 
perties of the timber and the metals used in the construction of 
his ships, of the hemp whereof his rigging is composed, of the 
wind that fills his sails, of all the natural agents brought to con- 
cur in his purpose, with precisely the same view and the same re- 
sult, and in the same manner too, as the agriculturist avails him- 
self of the earth, the rain, and the atmosphere.* 

Thus, when Raynal says of commerce, as contrasted with 
agriculture and the arts, that " it produces nothing of itself," he 
shows himself to have had no just conception of the phenome- 
non of production. In this instance Raynal has fallen into the 
same error with regard to commerce, as the economists made 
respecting both commerce and manufacture. They pronounced 
agriculture to be the sole channel of production; Raynal refers 
production to the two channels of agriculture and manufacture: 
his position is nearer the truth than the other, but still is erro- 
neous. 

Condillac also is confused in his endeavour to explain the 
mode in which commerce produces. He pretends that, because 
all commodities cost to the seller less than to the buyer, they de- 
rive an increase of value from the mere act of transfer from one 
hand to another. But this is not so: for, since a sale is nothing 
else but an act of barter, in which one kind of goods, silver for 
example, is received in lieu of another kind of goods, the loss 
which either of the parties dealing should sustain on one article 
would be equivalent to the profit he would make on the other, 
and there would be to the community no production of value 
whatsoever. "f When Spanish wine is bought at Paris, equal 

* Genovesi, who lectured on political economy at Naples, defines com- 
merce to be " the exchange of superfluities for necessaries." He gives as 
his reason, that in every transaction of exchange, the article received ap- 
pears to each of the contracting parties more necessary than that given. — • 
This is a far-fetched notion, which I think myself called on to notice, be- 
cause it has obtained considerable currency. It would be difficult to prove, 
that a poor labourer, who goes to the alehouse on a Sunday, exchanges 
there his superfluity for a necessary. In all fair traffic, there occurs a mu- 
tual exchange of two things, which are worth one the other, at the time and 
place of exchange. Commercial production, that is to say, the value added 
by commerce to the things exchanged, is not operated by the act of ex- 
change, but by the commercial operations that precede it. 

The Count de Verri is the only writer within my knowledge, who has ex- 
plained the true principle and ground-work of commerce. In the year 1771 
he thus expresses himself: " Commerce is in fact nothing more than the 
transport of goods from one place to another." Meditazioni sulla economia 
politica, § 4. The celebrated Adam Smith himself appears to have had no 
very clear idea of commercial production. He merely discards the opinion, 
that there is any production of value in the act of exchange. 

t This circumstance had escaped the attention of Sismondi, or he would 



/ 



8 ON PRODUCTION. book i. 

value is really given for equal value: the silver paid, and the 
wine received, are worth one the other; but the wine had not 
the same value before its export from Alicant: its value has 
really increased in the hands of the trader, by the circumstance 
of transport, and not by the circumstance, or at the moment, of 
exchange. The seller does not play the rogue, nor the buyer 
the fool; and Condillac has no grounds for his position, that " if 
men always exchanged equal value for equal value, there would 
be no profit to be made by the traders."* 

In some particular cases the two other branches industry pro- 
produce in a manner analagous to commerce, viz. by giving a 
value to things to which they actually communicate no new 
quality, but that of approximation to the consumer. Of this de- 
scription is the industry of miners. The coal or metal may ex- 
ist in the earth, in a perfect state, but unpossessed of value. The 
miner extracts them thence, and this operation gives them a va- 
lue, by fitting them for the use of mankind. So also of the her- 
ring fishery. Whether in or out of the sea the fish is the same; 
but, under the latter circumstances, it has acquired an utility, a 
value, it did not before possess. f 

not have said, " The trader places himself between the producer and the 
consumer, to benefit them both at once, making his charge for that benefit 
upon both." {Nouveaux Principes d? Economie Pol. Liv. ii. ch. 8.) He 
would make it appear as if the trader subsisted wholly upon the'values pro- 
duced by the agriculturist and the manufacturer; whereas he is maintain- 
ed by the real value he himself communicates to commodities by giving 
them an additional modification, an useful property. It is this very notion 
that stirs up the popular indignation against the dealers in grain. 

L. Say, of Nantes, has fallen into the same mistake (Principales Causes 
de la Richesse, &c. p. 110.) By way of demonstrating the value conferred 
by commerce to be unreal, he alleges it to be absorbed by the charges of 
transport. By this incidental process of reasoning, the economists concluded 
manufacture to be unproductive : not perceiving, that in these very charges 
consists the revenue of the commercial and manufacturing producers ; and 
that it is in this way, that the values raised by production at large are dis- 
tributed amongst the several producers. 

* See his work entitled " Le Commerce et le Gouvernment consider^s re- 
lativement Vun a Vautre." Ire. partie, ch. 6. 

t We may consider as agents of the same class of industry, the cultivator 
of the land, the breeder of cattle, the woodcutter, the fisherman that takes 
fish he has been at no pains in breeding, and the miner who, from the bow- 
els of the earth, extracts metal, stone, or combustibles, that nature has 
placed there in a perfect state ; and, to avoid multiplicity of denominations, 
the whole of these occupations may be called by the name of agricultural 
industry, because the superficial cultivation of the earth, is the chief and 
most important of all. Terms are of little consequence, when the ideas are 
clear and definite. The wine grower, who himself expresses the juice of 
his grapes, performs a mechanical operation, that partakes more of manu- 
facture than of agriculture. But it matters little whether he be classed as 
a manufacturer or agriculturist ; provided that it be clearly comprehended 
in what manner his industry adds to the value of the product. If we wish to 
give separate consideration to every possible manner of giving value to 
things, industry may be infinitely subdivided. If it be the object to gene- 
ralize to the utmost, it may be treated as one and the same ; for every branch 



CHAP. II. ON PRODUCTION. 9 

Examples might be infinitely multiplied, and would all bear as 
close an affinity, as those natural objects, which the naturalist 
classifies only to facilitate their description. 

This fundamental error of the economists, in which I have 
shown that their adversaries in some measure participated, led 
them fo the strangest conclusions. According to their theory, 
(he traders and manufacturers, being unable to add an iota to 
the general stock of wealth, live entirely at the expense of the 
sole producers, that is to say, the proprietors and cultivators of 
the land. Whatever new value they may communicate to things, 
they at the same time consume an equivalent product, furnished 
by the real producers : manufacturing and commercial nations, 
therefore, subsist wholly upon the wages they receive from their 
agricultural customers; in proof of which position, they alleged 
that Colbert ruined France by his protection of manufactures, 
&c.* 

The truth is, that, in whatever class of industry a person is 
engaged, he subsists upon the profit he derives from the addi- 
tional value, or portion of value, no matter in what ratio, which 
his agency attaches to the product he is at work upon. The 
total value of products serves in this way to pay the profits of 
those occupied in production. The wants of mankind are sup- 
plied and satisfied out of the gross values produced and created, 
and not out of the 7iet values only. 

A nation, or a class of a nation, engaged in manufacturing or 
commercial industry, is not a whit more nor less in the pay of 
another, than one employed in agriculture. The value created 
by one branch is of the same nature as that created by the others. 
Two equal values are worth one the other, although perhaps the 
fruit of different banches of industry : and when Poland barters its 
staple product, wheat, for the staple commodity of Holland, East 
and West India produce, Holland is no more in the pay or ser- 
vice of Poland, than Poland is of Holland. 

Nay, Poland herself, which exports at the rate of ten millions 
of wheat annually, and therefore, according to the economists, 
takes the sure road to national wealth, is, notwithstanding, poor 
and depopulated : and why 1 — Because she confines her industry 
to agriculture, though she might be at the same time a commer- 
cial and manufacturing state. Instead of keeping Holland in her 
pay, she may with more propriety be said to receive wages from 
the latter, for the raising often millions of wheat per annum. Nor 
is she a jot less dependent than the nations that buy wheat of 
her: for she has just as much desire to sell to them, as they have 
to buy of her.|" 

of it will resolve itself into this : the employment of natural substances and 
agents in the adaptation of products to human consumption. 

* See the numberless writings of that sect. 

tWe shall find in the sequel, that, if any one nation can be .said to be in 

10 



10 ON PRODUCTION. book i 

Moreover, it is not true that Colbert ruined France. On the 
contrary, the fact is that France, under Colbert's administration, 
emerged from the distress that two regencies and a weak reign 
had involved her in. She was, indeed, afterwards ruined again ; 
but for this second calamity, she may thank the pageantry and 
the wars of Louis XIV. Nay, the very prodigality of that prince 
is an undeniable evidence of the vast resources that Colbert 
had placed at his disposal. It must, however, be admitted that 
those resources would have been still more ample, if he had but 
given the same protection to agriculture, as to the other branches 
of industry. 

Thus it is evident, that the means of enlarging and multiplying 
wealth within the reach of every community are much less con- 
fined than the economists imagined. A nation, by their account, 
was unable to produce annually any values beyond the net annual 
produce of its lands ; to which fund alone recourse could be had 
for the support, not only of the proprietary and the idler, but like- 
wise of the merchant, the manufacturer, and the mechanic, as 
well as for the total consumption of the government. Whereas 
we have just seen, that the annual produce of a nation is com- 
posed, not of the mere net produce of its agriculture, but of the 
gross produce of its agriculture, commerce, and manufacture 
united. For, in fact, is not the sum total, that is to say, the ag- 
gregate of the gross product raised by the nation, disposable for 
its consumption? Is value produced less an item of wealth, be- 
cause it must needs be consumed? And does not value itself ori- 
ginate in this very applicability to consumption? 

Tlie English writer Stewart, who may be looked upon as the 
leading advocate of the exclusive system, the system founded on 
the maxim, that the wealth of one set of men is derived from the 
impoverishment of another, is himself no less mistaken in assert- 
ing, that, " when once a stop is put to external commerce, the 
stock of internal wealth can not be augmented."* Wealth, it 
seems, can come only from abroad ; but abroad, where does it 
come from ? from abroad also. So that, in tracing it from abroad 
to abroad, we must necessarily, in the end, exhaust every 
source, till at last we are compelled to look for it beyond the 
limits of our own planet, which is absurd. 

Forbonnais,! too, builds his prohibitory system on this glaring 
fallacy ; and, to speak freely, on this fallacy are founded the ex- 
clusive systems of all the short-sighted merchants, and all the 
governments of Europe and of the world. They all take it for 
granted, that what one individual gains must needs be lost to an- 

the senrice of another, it is that, which is the most dependent ; and that the 
most dependent nations are, not those which have a scarcity of land, but 
those which have a scarcity of capital. 

* Essay on Political Economy, b. ii. c. 26. 

iElauens de Commerce. 



CHAP. n. ON PRODUCTION. B, 

other; that what is gained by one country is inevitably lost to an- 
other : as if things were incapable of receiving any increase of 
value ; and as if the possessions of abundance of individuals and 
of communities could not be multiplied, without the robbery of 
some body or other. If one man, or set of men, could only be 
enriched at others' expense, how could the whole number of indi- 
viduals, of whom a state is composed, be richer at one period 
than at another, as they now confessedly are in France, England, 
Holland, and Germany, compared with what they were formerly? 
How is it, that nations are in our days more opulent, and their 
wants better supplied in every respect, than they were in the 
seventeenth century 1 Whence can they have derived that por- 
tion of their present wealth, which then had no existence? Is it 
from the mines of the new continent? They had already advanc- 
ed in wealth before the discovery of America. Besides, what is 
that which these mines have furnished? Metallic wealth or 
value. But all the other values which those nations now possess, 
beyond what they did in the middle ages, whence are they de- 
rived? Is it not clear, that these can be no other than created 
values ? 

We must conclude, then, that wealth, which consists in the 
value that human industry, in aid and furtherance of natural 
agents, communicates to things, is susceptible of creation and 
destruction, of increase and diminution, within the limits of each 
nation, and independently of external agency, according to the 
method it adopts to bring about those effects. An important 
truth, which ought to teach mankind, that the objects of rational 
desire are within their reach, provided they have the will and in- 
telligence to employ the true means of obtaining them. Those 
means it is the purpose of this work to investigate and unfold. 



CHAPTER III. 

OP THE NATURE OF PRODUCTIVE CAPITAL, AND THE MODE IN 
WHICH IT CONCURS IN THE BUSINESS OF PRODUCTION. 

As we advance in the investigation of the processes of indus- 
try, we can not fail to perceive, that mere unassisted industry is 
insufficient to invest things with value. The human agent of 
industry must, besides, be provided with pre-existing products ; 
without which his agency, however skilful and intelligent, would 
never be put in motion. These pre-existing requisites are, 

1. The tools and implements of the several arts. The hus- 
bandman could do nothing without his spade and mattock, the 
weaver without his loom, or the mariner without his ship. 



12 ON PRODUCTION. book i. 

2. The products necessary for the subsistence of the indus- 
trious agent, so long as he is occupied in completing his share 
of the work or production. This outlay of his subsistence is, 
indeed, in the long run, replaced by the product he is occupied 
upon, or the price he will receive for it ; but he is obliged con- 
tinually to make the advance. 

3. The raw materials, which are to be converted into finished 
products by the means of his industry. These materials, it is 
true, are often the gratuitous offerings of nature, but they are 
much more generally the products of antecedent industry as in 
the case of seed-corn supplied by agriculture, metals, the fruit of 
the labour of the miner and smelter, drugs brought by the mer- 
chant perhaps from the extremities of the globe. The value of 
all these must be found in advance by the industrious agent that 
works them up. 

The value of all these items constitutes what is denominated 
productive capital. 

Under this head of productive capital must likewise be classed 
the valufcj of all erections and improvements upon real or Itrnd- 
ed property, which increase its annual produce, as well as that of 
the farming live and dead stock, that operates as machinery in 
aid of human industry. 

Another item of productive capital, is money, whenever it is 
employed to facilitate the interchange of products, without which, 
production could never make any progress. Money distributed 
through the whole mechanism of human industry, like the oil 
that greases the wheels of complex machinery, gives the requisite 
ease and facility to its movements. But gold and silver are not 
productive, unless employed by industry ; they are like the oil 
in a machine remaining in a state of inaction. And so also of all 
other tools and implements of human industry. 

It would evidently be a great mistake to suppose, that the ca- 
pital of a community consists solely of its money. The mer- 
chant, the manufacturer, the cultivator, commonly have the least 
considerable portion of the value composing their capital invested 
in the form of money ; nay, the more active their concern is, the 
smaller is the relative proportion of their capital so vested to the 
residue. The funds of the merchant are placed out in goods on 
their transit by land or water, or warehoused in different direc- 
tions : the capital of the manufacturer chiefly consists of the raw 
material in different stages of progress, of tools, implements, and 
necessaries for his workmen : while that of the cultivator is vest- 
ed in farming buildings, live stock, fences, and enclosures. They 
all studiously avoid burthening themselves with more money 
than is sufficient for current use. 

Wliat is true of one, two, thfee, or four individuals, is true of 
society in the aggregate. The capital of a nation is made up of 
the sum total of private capitals ; and, in proportion as a nation is 



CHAP. III. 



ON PRODUCTION. 



13 



prosperous and industrious, in the same proportion is that part of 
its capital, vested in the shape of money, trifling compared to the 
amount of the gross national capital. Neckar estimates the circu- 
lating medium in France, in the year 1784, at about 2200 millions 
o^ francs, and there are reasons for believing his estimate exagge- 
rated ; but this is not the time to state them. However, if ac- 
count be taken of all the works, enclosures, live stock, utensils, 
machines, ships, commodities, and provisions of all sorts belong- 
ing to the French people or their government in every part of the 
world; and if to these be added the furniture, decorations, jewel- 
lery, plate, and other items of luxury or convenience, whereo^ 
they were possessed, at the same period, it will be found, that 
2200 millions of circulating medium was a mere trifle compared 
to the aggregate of these united values.* 

Beeke estimates the total capital of Great Britain at 2300 
millions Sierling,f (equal to more than 55,000 millions of our 
francs.) The total amount of her circulating specie, before the 
establishment of her present paper money, was never reckoned 
by the highest estimates of more than 47 millions sterling; J that 
is to say, about l-50th of her capital. Smith reckoned it at no 
more than 18 millions, which could not be the l-127th part.(l) 

Capital in the hands of a national government forms a part of 
the gross national capital. 

We shall see, by-and-by, how capital, which is subject to a 
continual wear and consumption in the process of production, is 
continually replaced by the very operation of production ; or ra- 
ther, how its value, when destroyed under one form, re-appears 

* Arthur Young, in his ^^ Journey in France," in spite of the unfavourable 
view he gives of French agriculture, estimates the total capital employed 
in that kingdom in that branch of industry alone, at more than 11,000 mil- 
lions of francs ; and states his belief, that the capital of Great Britain, simi- 
larly employed, is in the proportion of two to one. 

\ Observations on the produce of the income-tax. 

tPitt, who is supposed to have over-rated the quantity of specie, states 
the gold at forty-four millions; and Price estimates the silver at three mil- 
lions, making a total of forty -seven millions. 



(1) [The amomit of the national capital of Great Britain, including Ire- 
land, according to a conjectural estimate made by Dr. Colquhoun, in the 
year 1814, is as follows 



Productive 
Property. 



England 

Scotland 

Ireland 

Military stores & other 
property common to 
Britain and Ireland, 

Total of each kind of 



;ei, 543,400,000 
239,580,000 
467,660,000 



property, 



£2,250,640,000 



Unproduc- 
tive. 



271,500,000 
38,500,000 
87,000,000 



Gov'ment 
Property. 



32,000,000 
3,000,000 
9,000,000 



Total of each 
Country. 



1,846,900,000 
281,080,000 
563,660,000 

45,000,000 



397,000,000 44,000,000 2,736,640,000 
American Editor. 



14 ON PRODUCTION. book i. 

under another. At present it is enough to have a distinct con- 
ception, that, without it, industry could produce nothing. Capital 
must work, as it were, in concert with industry; and this concur- 
rence is what I call, the productive agency nf capital. 



CHAPTER IV. 

OP THE NATURAL AGENTS THAT ASSIST IN THE PRODUCTION OF 
WEALTH, AND SPECIALLY OF LAND. 

Independently of the aid that industry receives from capital, 
that is to say, from products of her own previous creation, towards 
the creation of still farther products, she avails herself of the agen- 
cy and powers of a variety of agents not of her own creation, but 
offered spontaneously by nature ; and from the co-operation of 
these natural agents derives a portion of the utility she commu- 
nicates to things. 

Thus, when a field is ploughed and sown, besides the science 
and the labour employed in this operation, besides the pre-creat- 
ed values brought into use, the values, for instance, of the plough, 
the harrow, the seed-corn, the food and clothing consumed by 
labourers during the process of production, there is a process 
performed by the soil, the air, the rain, and the sun, wherein 
mankind bears no part, but which nevertheless concurs in the 
creation of the new product that will be acquired at the season 
of harvest. This process I call \hQ productive agency of natural 
agents. 

The term natural agents is here employed in a very extensive 
sense ; comprising not merely inanimate bodies, whose agency 
operates to the creation of value, but likewise the laws of the 
physical world, as gravitation, which makes the weight of a 
clock descend ; magnetism, which points the needle of the com- 
pass : the elasticity of steel ; the gravity of the atmosphere ; the 
property of heat to discharge itself by ignition, &c. &c. 

The productive faculty of capital is often so interwoven with 
that of natural agents, that it is difficult, or perhaps impossible, 
to assign, with accuracy, their respective shares in the business 
of production. A hot house for the raising of exotic plants, a 
meadow fertilized by judicious irrigation, owe the greater part of 
their productive powers to works and erections, t!ie effect of 
antecedent production, which foim a part of the capital devoted 
to the furtherance of actual and present production. The same 
may be said of land newly cleared and brought into cultivation ; 
of farm-buildings ; of enclosures ; and of all other permanent 
ameliorations of a landed estate. These values are items of capi- 



tjHAP. rv. ON PRODUCTION. 15 

tal, though it be no longer possible to sever them from the soil 
they are attached to.* 

In the employment of machinery, which wonderfully augments 
the productive power of man, the product obtained is due partly 
to the value of the capital vested in the machine, and partly 
to the agency of natural powers. Suppose a walking-wheel,! 
worked by ten men, to be used in place of a wind-mill, the pro- 
duct of the mill might be considered as the fruit of the productive 
agency of a capital consisting of the value of th€ machine, and of 
the labour of ten men employed in turning the wheel. If the walk- 
ing-wheel be supplanted by sails, it is evident that the wind, a 
natural agent, does the work often human beings. 

In this instance, the absence of the natural agent might be 
remedied, by the employment of another power ; but there are 
many cases, in which the agency of nature could not possibly be 
dispensed with, and is yet equally positive and real: for example, 
the vegetative power of the soil, the vital principle which concurs 
in the production of the animals domesticated to our use. A flock 
of sheep is the joint result of the owner's and shepherd's care, 
and the capital advanced in fodder, shelter, and shearing, and of 
the action of the organs and viscera with which nature has fur- 
nished these animals. 

Thus nature is commonly the fellow labourer of man and his 
instruments; a fellowship advantageous to him in proportion as he 
succeeds in dispensing with his own personal agency, and that 
of his capital, and in throwing upon nature a larger part of the 
burthen of production. 

Smith has taken infxnite pains to explain, how it happens that 
civilized communities enjoy so great an abundance of products, 
in comparison with nations less polished, and in spite of the 
swarm of idlers and unproductive labourers, that is to be met with 
in society. He has traced the source of that abundance to the 
division of labour; J and it cannot be doubted, that the productive 
power of industry is wonderfully enhanced by that division, as we 
shall hereafter see by following his steps ; but this circumstance 
alone is not sufficient to explain a phenomenon, that will no long- 
er surprise, if we consider the power of the natural agents that 
industry and civilization set at work for our advantage. 

*It is for the proprietor of the land and of the capital respectively, when 
the ownership is in different persons, to settle between them the respective 
value and efficacy of the agency of these two productive agents. The world 
at large may be content to comprehend, without taking the trouble of mea- 
suring their respective shares in the production of wealth. 

t A wheel in form of a drum, turned by men walking inside, {roue d 
marckre.) 

t Take his own words : " It is the great multiplication of the productions 
of all the different arts, in consequence of the division of labour, which oc- 
casions, in a well-governed society, that universal opulence, which extends 
Itself to the lowest ranks of the people." Wealth of Nations, b. i. c. 1. 



16 ON PRODUGTIOxV. book i. 

Smith admits that human intelligence, and the knowledge of 
the laws of nature, enable mankind to turn the resources she 
offers to better account : but he goes on to attribute to the divi- 
sion of labour this very degree of intelligence and knowledge ; 
and he is right to a certain degree ; for a man, by the exclusive 
pursuit of a single art or science, has ampler means of accelerat- 
ing its progress towards perfection. But, when once the system 
of nature is discovered, the production resulting from the disco- 
very, is no longer the product of the inventor's industry. The 
man who first discovered the property of fire to soften metals, 
was not the actual creator of the utility this process adds to 
smelted ore. That utility results from the physical action of 
fire, in concurrence, it is true, with the labour and capital of 
those who employ the process. But are there no processes that 
mankind owes the knowledge of to pure accident? or that are so 
self-evident, as to have required no skill to discover? When a 
tree, a natural product, is felled, is society put into possession of 
no greater produce than that of the mere labour of the woodman? 

From this error Smith has drawn the false conclusion, that all 
values produced represent pre-exerted human labour or industry, 
either recent or remote; or, in other words, that wealth, is no- 
thing more than labour accumulated ; from which position he in- 
fers a second consequence equally erroneous, viz. that labour is 
the sole measure of wealth, or of value produced. 

This system is obviously in direct opposition to that of the 
economists of the eighteenth century, who on the contrary, main- 
tained thai labour produces no value without consuming an equi- 
valent; that, consequentlv, it leaves no surplus, no net produce; 
and that nothing but the earth produces gratuitous value, — there- 
fore nothing else can yield net produce. Each of these positions 
has been reduced to system; I only cite them to warn the stu- 
dent of the dangerous consequences of an error in the outset,* 
and to bring the science back to the simple observation of facts. 
Now facts demonstrate, that values produced are referable to 
the agency and concurrence of industry, of capital, "f and of natu- 

* Amongst other dangerous consequences of the system of the economists, 
is the notable one of substituting a land-tax in lieu of all other taxation ; in 
the certainty, that this tax would affect all produced value whatever. Upon 
a contrary principle, and in pursuance of the maxims laid down by Smith, 
the net produce of land and of capital ought to be exempted from taxation 
altogether, if with him we take for granted, that they produce nothing 
spontaneously; but this would be as unjust on the opposite side. 

i Altliough Smith has admitted the productive power of land, he has dis- 
regarded the completely analogous power of capital. A machine, an oil- 
mill for example, which employs a capital of 20,000 /r., and gives an annual 
net return of 1000 /V., after paying all expenses, gives a product quite as 
substantial as tliat of a real estate, that cost 20,000/r., and brings an annual 
rent or net produce of lOOO/n, all charges deducted. Smith maintains, that 
a mill which has cost 20,000/r., represents labour to that amount, bestowed 
at sundry times upon the difterent parts of its fabric; therefore, that the 



cfiAP. IV. ON PRODUCTION. 17 

ral agents, whereof the chief, though by no means the only one, 
is land capable of cultivation; and that no other but these three 
sources can produce value, or add to human wealth. 

Of natural agents, some are susceptible of appropriation, that 
is to say, of becoming the property of an occupant, as a field, a 
current of water; others can not be appropriated, but remain 
liable to public use, as the wind, the sea, free navigable streams, 
the physical or chemical action of bodies one upon another, &c» 
&c. 

We shall by and by have an opportunity of convincing our- 
selves, that this alternative, of productive agents being or not be- 
ing susceptible of appropriation, is highly favourable to the pro- 
gress of wealth. Natural agents, like land, which are susceptible 
of appropriation, would not produce nearly so much, were not 
the proprietors certain of exclusively gathering their produce, 
and able to vest in them, with full confidence, the capital which 
so much enlarges their productiveness. On the other hand, the 
indefinite latitude allowed to industry to occupy at will the un- 
appropriated natural agents, opens a boundless prospect to the 
extension of her agency and production. It is not nature, but 
ignorance and bad government, that limit the productive powers 
of industry. 

Such of the natural agents as are susceptible of appropriation, 
form an item of productive means; for they do not yield their 
concurrence without equivalent; which equivalent, as we shall 
see in the proper place, forms an item of the revenues of the ap- 
propriators. At present we must be content to investigate the 
productive operation of natural agents of every description, whe- 
ther already known, or hereafter to be discovered. 

net produce of the mill is the net produce of that precedent labour. But he 
is mistaken: granting, for argument sake, the value of the mill itself to be 
the value of this previous labour; yet the value daily produced hj the mill 
is a new value altogether; just the same, as the rent of a landed estate is a 
totally different value from the value of the estate itself, and may be con- 
sumed, without at all affecting the value of the estate. If capital contained 
itself no productive faculty, independent of that of the labour which created 
it, how is it possible, that capital could furnish a revenue in perpetuity, in- 
<iependent of the profit of the industry that employs it ? The labour that 
created the capital would receive wages after it ceased to operate, — would 
have interminable value ; which is absurd. It will be seen by and by, that 
*hese notions have not been mere matter of speculation. 

11 



18 ON PRODUCTION. book i. 



CHAPTER V. 

ON THE MODE IN WHICH INDUSTRY, CAPITAL, AND NATURAL 
AGENTS UNITE FOR THE PURPOSE OF PRODUCTION. 

We have seen how industry, capital, and natural agents concur 
in production, each in its respective department; and we have 
likewise seen, that these three sources are indispensable to the 
creation of products. It is not, however, absolutely necessary 
that they should all belong to the same individual. 

An industrious person may lend his industry to another pos- 
sessed of capital and land only. 

The owner of capital may lend it to an individual possessing 
land and industry only. 

The landholder may lend his estate to a person possessing 
capital and industry only. 

Whether the thing lent be industry, capital, or land, inasmuch 
as all three concur in the creation of value, their use also bears 
value, and is commonly paid for. 

The price paid for the loan of industry is called loages. 

The price paid for the loan of capital is called interest. 

And that paid for a loan of land is called rent. 

The ownership of land, capital, and industry are sometimes 
united in the same hands. A man who cultivates his own gar- 
den at his own expense, is at once the possessor of land, capital, 
and industry, and exclusively enjoys the profit of proprietor, ca- 
pitahst, and labourer. 

The knife-grinder's craft requires no occupancy of land; he 
carries his stock in trade upon his shoulders, and his skill and 
industry at his fingers' ends; being at the same time adventurer, (a) 
capitalist, and labourer. 

It is seldom that we meet with adventurers in industry so 
poor, as not to own at least a share of the capital embarked in 
their concern. Even the common labourer generally advances 
some portion; the bricklayer comes with his trowel in his hand; 
the journeyman tailor is provided with thimble and needles ; all 
are clothed better or worse ; and though it be true, that their 

(a) The term entrepreneur is difficult to render in English ; the corres- 
ponding- word, undertaker, being already appropriated to a limited sense. It 
signifies, the master-manufacturer in manufacture, the farmer in agricul- 
ture, and the merchant in commerce ; and generally in all three branches, 
the person who takes upon himself the immediate responsibility, risk, and 
conduct of a concern of industry, whether upon his own or a borrowed capi- 
tal. For want of a better word, it will be rendered into English by the 
term adventurer'' T. 



CHAP. V. ON PRODUCTION. 19 

clothing must be found out of their wages, still they find it them- 
selves in advance. 

Where the land is not exclusive property, as is the case with 
some stone quarries, with public rivers and seas to which indus- 
try resorts for fish, pearls, coral, &c. products may be obtained 
by industry and capital only. 

Industry and capital are likewise competent to produce by 
themselves, when that industry is employed upon products of 
foreign growth, procurable by capital only; as in the European 
manufacture of cotton and many other articles. So that every 
class of manufacture is competent to raise products, provided 
there be industry and capital exerted. The presence of land 
is not absolutely necessary, unless perhaps the area whereon the 
work is done, and which is commonly rented, may be thought to 
come under this description, as in extreme strictness it certainly 
mCist. However, if the ground where the business of industry 
is carried on, be reckoned as land used, it must at least be ad- 
mitted, that, with aid of a large capital, an immense manufactur- 
ing concern may be conducted upon a very trifling spot of ground. 
Whence this conclusion may be drawn, that national industry is 
limited, not by territorial extent, but by extent of capital. 

A stocking manufacturer with a capital, say of 20,000 fr.., 
may keep in constant work ten stocking frames. If he manages 
to double his capital, he can employ twenty ; that is to say, he 
may buy ten more frames, pay double ground-rent, purchase 
double the quantity of silk or cotton to be wrought into stockings, 
and make the requisite advances to double the number of work- 
men, &c. &c. 

But that portion of agricultural industry, devoted to the tillage 
of land, is, in the course of nature limited by extent of surface. 
Neither individuals nor communities can extend or fertilize their 
territory, beyond what the nature of things permits; but they 
have unlimited power of enlarging their capital, and, consequent- 
ly, of setting at work a larger body of industry, and thus of mul- 
tiplying their products ; in other words, their wealth. 

There have been instances of people, like the Genevese, who 
with a territory that has not produced the twentieth part of the 
necessaries of life, have yet contrived to live in affluence. The 
natives of the barren glens of Jura are in easy circumstances, 
because many mechanical arts are there practised. In the 13th 
century, the world beheld the republic of Venice, ere it held a 
foot of land in Italy, derive wealth enough from its commerce to 
possess itself of Dalmatia, together with most of the Greek isles, 
and even the capital of the Greek empire. The extent and fer- 
tility of a nation's territory depend a good deal upon its fortunate 
position. Whereas the power of its industry and capital depends 
upon its own good management ; for it is always competent to 
improve the one and augment the other. 



20 ON PRODUCTION. book i. 

Nations deficient in capital labour under great disadvantage in 
the sale of their produce ; being unable to sell at long credit, or 
to grant time or accommodation to their home or foreign cus- 
tomers. If the deficiency be very great indeed, they may be un- 
able even to make the advance of the raw material and their 
own industry. This accounts for the necessity, in the Indian 
and Russian trade, of remitting the purchase-money six months 
or sometimes a year in advance, before the time when an order 
for goods can be executed. These nations must be highly fa- 
voured in other respects, or they never could make considerable 
sales in the face of such a disadvantage. 

Having informed ourselves of the method in which the three 
great agents of production, industry, capital, and natural agents, 
concur in the creation of products, that is to say, of things ap- 
plicable to the uses of mankind, let us proceed to analyse more 
minutely the particular operation of each. The inquiry is im- 
portant,^ inasmuch as it leads imperceptibly to the knowledge of 
what is more and what is less favourable to production, the tru© 
source of individual afHuenee, as well as of national power. 



CHAPTER VI. 

OF THE OPERITIONS COMMON TO ALL BRANCHES OF INDUSTRY 

ALIKE. 

If we examine closely the workings of human industry, it will 
be found, that, to whatever object it be applied, it consists of 
three distinct operations. 

The first step towards the attainment of any specific product, 
is the study of the laws and course of nature regarding that pro- 
duct. A lock could never have been constructed without a pre- 
vious knowledge of the properties of iron, the method of extract- 
ing from the mine and refining the ore, as well as of mollifying 
and fashioning the metal. 

The next step is the application of this knowledge to an useful 
purpose: for instance, the conclusion, or conviction, that a par- 
ticular form, communicated to the metal, will furnish the means 
of closing a door to all the wards, except to the possessor of the 
key. 

The last step is the execution of the manual labour, suggested 
and pointed out by the two former operations ; as, for instance, 
the forging, fifing, and putting together of the different component 
parts of the lock. 

These three operations are seldom performed by one and 
the same person. It commonly happens, that one man studies 



CHAP. VI. ON PRODUCTION. 21 

the laws and conduct of nature ; that is to say, the philosopher, 
or man of science, of whose knowledge another avails himself 
to create useful products ; being either agriculturist, manufac- 
turer, or trader; while the third supplies the executive exertion, 
under the direction of the former two ; which third person is the 
operative workman or labourer. 

All products whatever will be found on analysis, to derive ex- 
istence from these three operations. 

Take the example of a sack of wheat, or a pipe of wine. The 
first stage towards the attainment of either of these products was, 
the discovery by the natural philosopher, or geologist, (o) of the 
conduct and course of nature in the production of the grain or 
the grape; the proper season and soil for sowing or planting; 
and the care requisite to bring the herb or plant to maturity. 
The tenant, if not the proprietor himself, must afterwards have 
applied this knowledge to his own particular object, brought to- 
gether the means requisite to the creation of an useful product, 
and removed the obstacles in the way of its creation. Finally, 
the labourer must have turned up the soil, sown the seed, or 
pruned and bound up the vine. These three distinct operations 
were indispensable to the complete production of the product, 
corn or wine. 

Or take the example of a product of external commerce; such 
as indigo. The science of the geographer, the traveller, and 
the astronomer, bring us acquainted with the spot where it is to 
be met with, and the means of crossing the seas to get at it. 
The merchant equips his vessels, and sends them in quest of the 
commodity; and the mariner and land carrier perform the me- 
chanical part of this production. 

But, looking at the substance, indigo, as a mere primary ma- 
terial of a further or secondary product, of blue cloth for instance ; 
we all know that the chemist is first applied to for information; 
as to the nature of the substance, the method of dissolving it, 
and mordants requisite for fixing the colour; the means of per- 
fecting the process of dyeing are then collected by the master- 
manufacturer, under whose orders the labourer executes the ma- 
nual part of the process. 

Industry is, in all cases, divisible into theory, application, and 
execution. Nor can it approximate to perfection in any nation, 
till that nation excel in all three branches. A people, that is de- 
ficient in one or other of them, can not acquire products, which 
are and must be the result of all three. And thus we may learn 
to appreciate the vast utility of many sciences, which, at first 
sight, appear to be objects of mere curiosity and speculation.* 

(a) Agronome : I am not aware of any corresponding English term, de- 
noting the student in that branch of geology conversant with the properties 
of the surface of the earth ; in other words, the scientific agriculturist. T. 

* Besides the direct impulse, given by science to progressive industry. 



22 ON PRODUCTION. book i. 

The negroes of the coast of Africa are possessed of considera- 
ble ingenuity, and excel in all athletic exercises and handicraft 
occupations; but they seem greatly deficient in the two previous 
operations of industry. Wherefore, they are under the necessity 
of purchasing from Europe the stuffs, arms, and ornaments, they 
stand in need of. Their country yields so few products, not- 
withstanding its natural fertility, that the slave traders are oblig- 
ed to lay in their stock of provisions beforehand, to feed the 
slaves during the voyage.* 

In qualities favourable to industry, the moderns have greatly 
surpassed the ancients, and the Europeans outstript all the other 
nations of the globe. The meanest inhabitant of an European 
town enjoys innumerable comforts unattainable to the-sovereign 
of a savage tribe. The single article glass, that admits light 
into his apartment, and, at the same time, excludes the incle- 
mency of the weather, is the beautiful result of observation and 
science, accumulated and perfected during a long course of 
ages. To obtain this luxury, it was necessary previously to 
know what kind of sand was convertible into a substance pos- 
sessing extension, solidity, and transparency; as well as by the 
compound of what ingredients, and by what degree of heat, the 
substance was obtainable: to ascertain besides, the best form of 
furnace. The very wood-work, that supports the roof of a glass- 
house, requires, in its construction, the most extensive know- 
ledge of the strength of timber, and of the means_ of employing it 
to advantage. 

Nor was the mere knowledge of these matters sufficient; for 
that knowledge might possibly have lain dormant in the memory 
of one or two persons, or in the pages of literature. It was fur- 
ther requisite, that a manufacturer should have been found, pos- 
sessed of the means of reducing the knowledge into practice; 
who should have at first made himself master of all that was 
known of that particular branch of industry, and afterwards have 
accumulated, or procured, the requisite capital, collected artifi- 
cers and labourers, and assigned to each his respective occupa- 
tion. 

Finally, the work must have been completed by the manual 

and which indeed is indispensable to its success, it affords an indirect as- 
sistance, by tlie gradual removal of prejudice; and by teaching mankind to 
rely more upon their own exertions, than on the aid of superhuman power. 
Ignorance is the inseparable concomitant of practical habits, of that slavery 
of custom which stands in the way of all improvement; it is ignorance that 
imputes to a supernatural cause the ravages of an epidemical disease, which 
might perhaps be easily prevented or eradicated, and makes mankind recur 
to superstitious observances, when precaution, or the application of the re- 
medy, is all that is wanted. Sciences, like facts, are linked together by a 
chain of general connexion, and yield one another mutual support and cor- 
roboration. 

* See (Euvres de Poivre, p. 77, 78. 



cKiP. V!. ON PRODUCTION. 23 

skill of the workmen employed; some in constructing the build- 
ings and furnaces, some in keeping up the tire, mixing up the in- 
gredients, blowing, cutting, rolling out, fitting and fixing the 
pane of glass. The utility and beauty of the resulting product, 
is inconceivable to those who have never beheld this admirable 
creation of human industry. By means of industry, the vilest 
materials have been invested with the highest degree of utility. 
The very rags and refuse of wearing apparel have been trans- 
formed into the white and thin sheets, that convey from one end 
of the globe to the other, the requisitions of commerce and the 
particulars of art; that serve as the depositaries of the concep- 
tions of genius, and the vehicles of human experience from one 
age to another; to them we look for the evidence of our proper- 
ties; to them we entrust the most noble and amiable sentiments 
of the heart, and by them we awaken corresponding feelings in 
the breasts of our fellow-creatures. The extraordinary facilities 
for the communication of human intelligence which paper affords, 
entitles it to be considered as one of the products, that have 
been most efficacious in ameliorating the condition of mankind. 
Fortunate, indeed, would it have been, had an engine so power- 
ful never have been made the vehicle of falsehood, or the instru- 
ment of tyranny ! 

It is worth while to remark, that the knowledge of the man of 
science, indispensable as it is to the development of industry, 
circulates with ease and rapidity from one nation to all the rest. 
And men of science have themselves an interest in its diffusion; 
for upon that diffusion they rest their hopes of fortune, and, what 
is more prized by them, of reputation too. For this reason, a 
nation, in which science is but little cultivated, may neverthe- 
less carry its industry to a very great length, by taking advantage 
of the information derivable from abroad. But there is no way 
of dispensing with the other two operations of industry, the art 
of applying the knowledge of man to the supply of his wants, and 
the skill of execution. These qualities are of advantage to none 
but their possessors; so that a country well stocked with intelli- 
gent merchants, manufacturers, and agriculturists, has more 
powerful means of attaining prosperity, than one devoted chiefly 
to the pursuit of the arts and sciences. At the period of the re- 
vival of literature in Italy, Bologna was the seat of science; but 
wealth was centered in Florence, Genoa, and Venice. 

In our days, the enormous wealth of Britain is less owing to 
her own advances in scientific acquirements, high as she ranks 
in that department, than to the wonderful practical skill of her 
adventurers in the useful application of knowledge, and the supe- 
riority of her workmen in rapid and masterly execution. The 
national pride, that the English are often charged with, does not 
prevent their accommodating themselves with wonderful facility 
to the tastes of thoir customers and the consumers of their 



24 ON PRODUCTION. book u 

produce. Tl)oy supply with hats both the north and the south, 
i)erau?e they have learnt to make them light for the one market, 
and warm and thick for the other. Whereas the nation that 
makes but of one pattern, must be content with the home market 
only. 

The English labourer seconds the master manufacturer; he 
is commonly patient and laborious, and does not willingly send 
out an article from his hands, without giving it the utmost possi- 
ble precision and perfection; not that he bestows more time upon 
it, but that he gives it more of his care, attention and diligence, 
than the workmen of most other nations. 

There is no people, however, that need despair of acquiring 
the qualities requisite to the perfection of their industry. It is 
but 150 years since England herself had made so little progress, 
that she purchased nearly all her woollens from Belgium; and 
it is not more than SO years since Germany supplied with cotton 
goods the very nation, that now manufactures them for the whole 
world.* 

1 have said, that the cultivator, the manufacturer, the trader, 
make it their business to turn to profit the knowledge already ac- 
quired, and apply it to the satisfaction of human wants. I ought 
further to add, that they have need of knowledge of another 
kind, which can only be gained in the practical pursuit of their 
respective occupations, and may be called their technical skill. 
The most scientific naturalist, w^ith all his superior information, 
would probably succeed much worse than his tenant, in the at- 
tempt to improve his own land. A first-rate mechanist would 
most likely spin very indifferently without having served his ap- 
prenticeship, though admirably skilled in the construction of the 
cotton-machinery. In the arts there is a certain sort of perfec- 
tion, that results only from repeated trials, sometimes successful 
and sometimes the contrary. So that science alone is not suffi- 
cient to ensure the progress, without the aid of experiment, which 
is always attended with more or less of risk, and does not al- 
ways indemnify the adventurer, whose profit, even when success- 
ful, is moderated by competition; although society at large re- 
ceives the accession of a new product, or, what amounts to the 
same thing, of an abatement in the price of sn old one. 

In agriculture, experiments usually cost the rent of the soil for 
a year or more, over and above the labour and the capital engag- 
ed in them. 

In manufacture, experiment is hazarded on safer grounds of 

* The cotton manufacture did not exist in England in the 17th century. 
In 1705, we see, by the returns of the English customs, that the raw cotton 
manufactured in that country then amounted to no more than 1,170^880 
poimds weight. lii 1785, the quantity imported was 6,706,0001bs.; but in 
1790 it had got up to 25,941, OOOlbs., and in 1817 to as much as 131,951,000 
lbs., for the English market and for re-exportation. 



CHAP. VI. ON PRODUCTION. 25 

calculation, capital engaged for a much shorter period, and, if 
success ensue, the adventurer rewarded by a longer period of 
exclusive advantage, because his process is less open to obser- 
vation. In some places, too, the exclusive advantage is protect- 
ed by patents of invention. For all which reasons, the progress 
of manufacturing is generally more rapid and more diversified 
than that of agricultural industry. 

In commercial industry, the risk of experiment would be greater 
than in the other two branches, if the costs of the adventure had 
no auxiliary and concurrent object. But it is usually in the 
course of a regular trade, that a merchant hazards the introduc- 
tion of a virgin commodity of foreign growth into an untried 
market. In this manner it was that the Dutch, about the mid- 
dle of the seventeenth century, while prosecuting their commerce 
with China, with no very sanguine expectation, made experiment 
of a small assortment of dried leaves, from which the Chinese 
were in the habit of preparing their favourite beverage. Thus 
commenced the tea-trade, which now occasions the annual trans- 
port of more than 45 millions of pounds weight, that are sold in 
Europe for a sum of more than 400,000,000 /r.* 

In some cases of very rare occurrence, boldness is nearly cer- 
tain of success. When the Europeans had recently discovered 
the passage round the Cape of Good Hope and the continent of 
America,, their world was suddenly expanded to the East and 
West; and such was the infinity of new objects of desire in two 
hemispheres, whereof one was not at all, and the other but very 
imperfectly, known before, that an adventurer had only to make 
the voyage, and was sure of selling his returns to great advan- 
tage. 

In all but such extraordinary cases, it is perhaps prudent to 
defray the charges of experiments in industry, not out of the ca- 
pital engaged in the regular and approved channels of produc- 
tion, but out of the revenue that individuals have to dispose of at 
pleasure, without fear of impairing their fortune. The whims 
and caprices that divert to an useful end the leisure and revenue 
which most men devote to mere amusement, or perhaps to some- 
thing worse, can not be too highly encouraged. I can conceive 
no more noble employment of wealth and talent. A rich and 
philanthropic individual may, in this way, be the means of con- 
ferring upon the industrious classes, an-d upon the consumers at 
large, in other words, upon the mass of mankind, a benefit far 
beyond the mere value of what he actually disburses, perhaps 
beyond the whole amount of his fortune, however princely it 
may be. Who will attempt to calculate the value conferred ori 
mankind by the unknown inventor of the plough ?| 

* Voyage Commerciel et Politique aux Indes Orientales., par M. Felix Re- 
saouard de Sainte Croix. 

t Thanks to the art of prhiting, the names of the benefactors of maiikuid 

12 



26 ON PRODUCTION. book i. 

A government, that knows and practises its duties and has 
large resources at its disposal, does not abandon to individuals 
the whole glory and merit of invention and discovery in the field 
of industry. The charges of experiment when defrayed by the 
government, are not subtracted from the national capital, but 
from the national revenue; for taxation never does, or, at least, 
never ought to touch any thing, beyond the revenues of indivi- 
duals. The portion of them so spent is scarcely felt at all, be- 
cause the burthen is divided among innumerable contributors; 
and, the advantages resulting from success being a common be- 
nefit to all, it is by no means inequitable that the sacrifices, by 
which they are obtained, should fall on the community at large. 



CHAPTER VII. 

OF XHE LABOUR OF MANKIND, OF NATURE, AND OF MACHINERY 
RESPECTIVELY. 

By the term labour I shall designate that continuous action, 
exerted to perform any one of the operations of industry, or a 
part only of one of those operations. 

Labour, upon whichever of those operations it bebestowed, is 
productive, because it concurs in the creation of a product. Thus 
the labour of the philosopher, whether experimental or literary, 
is productive; the labour of the adventurer or master-manufac- 
turer is productive, although he perform no actual manual work ; 
the labour of every operative workman is productive, from the 
common day-labourer in agriculture to the pilot that governs the 
motion of a ship. 

Labour of an unproductive kind, that is to say, such as does 
not contribute to the raising of the products of some branch of 
industry or other, is seldom undertaken voluntarily; for labour, 
under the definition above given, implies trouble, and trouble so 
bestowed could yield no compensation or resulting benefit; 
wherefore, it would be mere folly or waste in the person bestow- 
ing it. When trouble is directed to the stripping another person 

will henceforward be lastingly recorded: and, if I mistake not, with more 
veneration than those which derive kistre from the deplora:ble exploits of 
military prowess. Among these will be preserved the names of Olivier de 
Serves, the father of French agriculture; the first who established an ex- 
perimental farm ; of Duham.el, of Malsherbes, to whom France is indebted 
for many vegetables now naturalized in her soil and climate : of Lavoisier, 
whose new system of chemistry has effected a still more important revolu- 
tion in the arts; and of the numerous scientific travellers of modern times; ' 
for travels, with an uselu! object, may be regarded as adventures in the £ejd 
of industry. -^ 



CHAP. VII. ON PRODUCTION. 2^ 

of the goods in his possession by means of fraud or violencOj 
what was before mere extravagance and folly, degenerates to ab- 
solute criminality; and there results no production, but only a 
forcible transfer of wealth from one individual to another. 

Man, as we have already seen, obliges natural agents, and 
even the products of his own previous industry, to work in con- 
cert with him in the business of production. There will, there- 
fore, be no ^difficulty in comprehending the terms labour or pro- 
ductive service of nature, and labour or productive service of capi- 
tal. 

The labour performed by natural agents, and that executed by 
pre-existent products, to which we have given the name of capi- 
tal, are closely analogous^ and are perpetually confounded one 
with the other: for the tools and machines which form a princi- 
pal item of capita'., are commonly but expedients more or less 
ingenious, for turning natural powers to account. The steam 
engine is but a complicated method of taking advantage of the 
alternation of the elasticity of water reduced to vapour, and of the 
weight of the atmosphere. So that, in point of fact, a steam-en- 
gine, employs more productive agency, than the agency of the 
capital embarked in it: for that machine is an expedient for forc- 
ing into the service of man a variety of natural agents, whose 
gratuitous aid may perhaps infinitely exceed in value the interest 
of the capital vested in the machine. 

It is in this light, that all machinery must be i-egarded, from 
the simplest to the most comphcated instrument, from a common 
tile to the most expensive and complex apparatus. Tools are 
but simple machines, and machines but complicated tools, where- 
by we enlarge the limited powers of our hands and fingers; and 
both are, in many respects, mere means of obtaining the co-ope- 
ration of natural agents,* Their obvious effect is to make less 
labour requisite for the raising the same quantity of produce, or, 
what comes exactly to the same thing^ to obtain a larger produce 
from the same quantity of human labour. — And this is the grand 
object and the acme of industry. 

Whenever a new machine, or a new and more expeditious 
process is substituted in the place of human labour previously in 
activity, part of the industrious human agents, whose service is 
thus ingeniously dispensed with, must needs be thrown out of 
employ. Whence many objections have been raised against the 
i;i>:e of machinery, which has been often obstructed by popular 
violence, and sometimes by the act of authority itself. 

To give any chance of wise conduct in such cases, it is neces- 



* Greneralization may at pleasure be carried still further ; a landed estate 
may be considered as a vast machine for the production of grain, which is 
reiitted and kept in repair by cultivation : or a flock of sheep as a machine 
for the raising of mutton or wool. 



28 ON PRODUCTION. book i. 

sary beforehand to acquire a clear notion of the economical ef- 
fect resulting from the introduction of machinery. 

A new machine supplants a portion of human labour, but does 
not diminish the amount of the product; if it did, it would be ab- 
surd to adopt it. When water-carriers are relieved in the supply 
of a city by any kind of hydraulic engine, the inhabitants are 
equally well supplied with water. The revenue of the district is 
at least as great, but it takes a different direction. That of the 
water-carriers is reduced, while that of the mechanists and capi- 
talists, who furnish the funds, is increased. But, if the superior 
abundance of the product and the inferior charges of its produc- 
tion, lower its exchangeable value, the revenue of the consumers 
is benefited; for to them every saving of expenditure is so much 
gain. 

This new direction of revenue, however advantageous to the 
community at large, as we shall presently see, is always attended 
with some painful circumstances. For the distress of a capital- 
ist, when his funds are unprofitably engaged or in a state of inac- 
tivity, is nothing to that of an industrious population deprived of 
the means of subsistence. 

Inasmuch as machinery produces that evil, it is clearly objec- 
tionable. But there are circumstances that commonly accompa- 
ny its introduction, and wonderfully reduce the mischiefs, while 
at the same time they give full play to the benefits of the innova- 
tion. For, 

1. New machines are slowly constructed, and still more slow- 
ly brought into use ; so as to give time for those who are inte- 
rested, to take their measures, and for the public administration 
to provide a remedy.* 

2. Machines can not be constructed without considerable la- 
bour, which gives occupation to the hands they throw out of em- 
ploy. For instance, the supply of a city with water by conduits 
gives increased occupation to carpenters, masons, smiths, pa- 
viours, &c. in the construction of the works, the laying down 
the main and branch pipes, &c. &c. 

3. The condition of consumers at large, and consequently, 
amongst them of the class of labourers affected by the innova- 
tion, is improved by the reduced value of the product that class 
was occupied upon. 

Besides it would be vain to attempt to avoid the transient evil, 

* Without having recourse to local or temporary restrictions on the use 
of new methods or machinery, which are invasions o£ tire property of tlie 
inventors or fahricators, a benevolejit administration can make provision for 
the employment of supplanted or inactive labour in tlie construction of 
works of public utility at the public expense, as of canals, roads, churches, 
or the like ; in extended colonization ; in the transfer of population from 
one spot to another. Employment is the more readily found for the hands 
thrown out of work by machinery, beca,URe they are commonly already in- 
urcd to labour. 



CHAP. vii. ON PRODUCTION. 29 

consequential upon the invention of a new machine, by prohibit- 
ing its employment. If beneficial, it is or will be introduced 
somewhere or other; its products will be cheaper than those of 
labour conducted on the old principle; and sooner or later that 
cheapness will run away with the consumption and demand. 
Had the cotton spinners on the old principle, who destroyed the 
spinning-jennies on their introduction into Normandy, in 17S9; 
succeeded in their object, France must have abandoned the 
cotton manufacture; every body would have bought the tbreign 
article, or used some substitute; and the spinners of Nor- 
mandy, who in the end, most of them found employment in the 
new establishments, would have been yet worse off for employ- 
ment. 

So much for the immediate effect of the introduction of ma- 
chinery. The ultimate effect is wholly in its favour. 

Indeed, if by its means man makes a conquest of nature, and 
compels the powers of nature and the properties of natural agents 
to work for his use and advantage, the gain is too obvious to 
need illustration. There must always be an increase of product, 
or a diminution in the cost of production. If the sale-price of a 
product do not fall, the acquisition redounds to the profit of the 
producer; and that vrithout any loss to the consumer. If it do 
fall, the consumer is benefited to the whole amount of the fall 
withouf any loss to the producer. 

The multiplication of a product commonly reduces its price, 
that reduction extends its consumption ; and so its production, 
though become more rapid, nevertheless gives employment to 
more hands than before. It is beyond question, that the manu- 
facture of cotton now occupies more hands in England, France, 
and Germany, than it did before the introduction of the macliine- 
ry that has abridged and perfected this branch of manufacture in 
so remarkable a degree. 

Another striking example of a similar effect is presented by 
the machine used to multiply with rapidity the copies of a literary 
performance, — I mean the printing-press. 

Setting aside all consideration of the prodigious impulse given 
by the art of printing to the progress of human knowledge and 
civilization, I will speak of it merely as a manufacture, and in an 
economical point of view. When printing was first brought into 
use, a multitude of copyists were of course immediately deprived 
of occupation; for it may be fairly reckoned, that one journey- 
man printer does the business of two hundred copyists. We may, 
therefore, conclude, that 199 out of 200 were thrown out of 
work. What followed? Why, in a little time, the greater facility 
of reading printed than written books, the low price to which 
books fell, the stimulus this invention gave to authorship, whe- 
ther devoted to amusement or instruction, the combination, in 
short, of all these causes, operated so effectually as to set at 



30 ON PRODUCTION. book i. 

work, in a very little time, more journeymen printers than there 
were formerly copyists. And if we cCuid now calculate with 
precision, besides the number of journeymen printers, the total 
number of other industrious people, that the press finds occupa- 
tion for, whether as type-founders and moulders, paper-makers, 
carriers, compositors, bookbinders, or booksellers, and the like, 
we should probably find, that the number of persons occupied in 
the manufacture of books is now 100 times what it was before 
the art of printing was invented. 

It may be allowable to add, that viewing human labour and 
machinery in the aggregate, in the supposition of the extreme 
case, viz. that machinery should be brought to supersede human 
labour altogether, yet the numbers of mankind would not be 
thinned, for the sum total of products would be the same, and 
there would probably be less suffering to the poorer and labour- 
ing classes to be apprehended ; for in that case the momentary 
fluctuations, that distress the diiferent bi-anches of industry, 
would princip;illy affect machinery, which, and not human labour, 
would be paralysed; and machinery can not die of hunger; it 
can only cease to yield profit to its employers, who are generally 
farther removed from want than mere labourers. 

But however great may be the advantages, which the adven- 
turers in industry, and even the operative classes, may ultimate- 
ly derive from the employment of improved machinery, the great 
gain accrues to the consumers, which is always the most impor- 
tant class, because it is the most numerous; because it compre- 
hends every description of producers whatever; and because the 
welfare of this class, wherein all others, are comprised, consti-: 
tutes the general well being and prosperity of a nation.* I repeat, 
that it is the consumers who draw the greatest benefit from ma- 
chinery ; for, though the inventor may indeed for some years 
enjoy the exclusive advantage of his invention, which it is highly 
just and proper he should, yet there is no instance of a secret re- 
maining long undivulged. Nothing can long escape publicity, 
least of all what people have a personal interest in discovering, 
especially if the secret be necessarily confided to the discretion 
of a number of persons employed in constructing or in working 
the machine. The product is thenceforward cheapened by com- 
petition to the full extent of the saving in the costs of production ; 
and thenceforward begins the full advantage to the consumer. 
The grinding of corn is probably not more profitable to the mil- 
ler now than formerly; but it costs infinitely less to the con- 
sumer. 

Nor is cheapness the sole benefit, that the consumer reaps 

* Paradoxical as it may appear, it is nevertheless true, that the labouring 
class is of all others the most interested in promoting the economy of hu- 
man laboiir ; for that is the class which benefits the most by the general 
cheapness, and suffers the most from the general dearnesg of commodities. 



«HAr. vii. ON PRODUCTION. 31 

from the introduction oi" more expeditious processes; he gene- 
raiiy gains in addition the greater perfection of the product. 
Painters could undoubtedly execute with the brush or pencil the 
designs that ornament our printed cahcoes and furniture papers, 
but the copperplates and rollers employed for that purpose give 
a regularity of pattern, and uniformity of colour, which the most 
skilful artist could never equal. 

The close pursuit of this inquiry through all the arts of indus- 
try would show, that the advantage of machinery is not limited 
to the bare substitution of it for human labour, but that, in fact, 
it gives a positive nev/ product, inasmuch as it gives a degree of 
perfection before unknown. The flatting-mill and the die exe- 
cute products, that the utmost skill and attention of the human 
hand could never accomplish. 

In fine, machinery does still more; it multiplies products, with 
which it has no immediate connexion. Without taking the trou- 
ble to reflect, one perhaps would scarcely imagine that the 
plough, the harrow, and other similar machines, whose origin is 
lost in the night of age.s, have powerfully contributed to procure 
for mankind, besides the absolute necessaries of life, a vast num- 
ber of the, superfluities they now enjoy, whereof they would 
otherwise never have had any conception. Yet, if the different 
dressings the soil requires could be no otherwise given, than by 
the spade, the hoe, and other such simple and tardy expedients, 
if we were unable to make available in agricultural production 
those domestic animals, that, in the eye of political economy, are 
but a kind of machines, it is most likely that the whole mass of 
human labour, now applicable to the arts of industry, would be 
occupied in raising the bare necessary subsistence of the actual 
population. Thus, the plough has been instrumental in releas- 
ing a number of hands for the prosecution of the arts even of the 
most frivolous kind ; and what is of more importance, for the 
cultivation of the intellectual faculties. 

The ancients were unacquainted with water or wind-mills. In 
their time, the wheat their bread was made of, was pounded by 
the labour of the hand : so that perhaps no less than twenty in- 
dividuals were occupied in pounding as much wheat as one mill 
can grind.* Now a single miller, or two at the most, is enough 
to feed and superintend a mill. By the aid, then, of this inge- 
nious piece of mechanism, two persons are as productive as 
twenty were in the days of Caesar. Wherefore, in every one of 
our mills, we make the wind, or a current of water, do the work 
of eighteen persons; which eighteen extra persons are just as 
well provided with subsistence; for the mill has in no respect 

* Homer tells us, in the Odyssey, b. xx., that twelve women were daily 
employed in grinding- corn for the family consumption of Ulysses, whose es- 
tablishment is not represented as larger than that of a private gentleman 
of fortune of modern days. 



32 ON PRODUCTION. book i. 

diminished the general produqe of the community: and whose 
exertions may be directed to the creation of new products, to be 
given by them in exchange for the produce of the mill ; thereby 
augmenting the general wealth of the community.* 



CHAPTER VIII. 

OF THE ADVANTAGES AND DISADVANTAGES RESULTING FROM DI- 
VISION OF LABOUR, AND OF THE EXTENT TO WHICH IT MAY 

BE CARRIED. 

We have already observed, that the several operations, the 
combination of which forms but one branch of industry, are not 
in general undertaken or performed by the same person ; for 
they commonly require different kinds of talent; and the labour 
requisite to each is enough to take up a man's whole time and 
attention. Nay, in some instances, a single one of these opera- 
tions is split again into smaller subdivisions, each of them suffi- 
cient for one person's exclusive occupation. 

Thus, the study of nature is shared amongst the chemist, the 
botanist, the astronomer, and many other classes of students in 
philosophy. 

Thus, too, in the application of human knowledge to the satis- 
. faction of human wants, in manufacturing industry, for instarice, 
we find different classes of manufacturers employed exclusively 
in the fabric of woollens, pottery, furniture, cottons, &c. &c. 

Finally, in the executive part of each of the three branches of 
industry, there are often as many diiierent classes of workmen 
as there are different kinds of work. To make the cloth of a 
coat, there must have been set to work the several classes of 
spinners, weavers, dressers, shearers, dyers, and many other 
classes of labourers, each of whom is constantly and exclusively 
occupied upon one operation. 

* Since the publication of the third edition of tliis work, M. de Sismondi 
has publiwhed his Nouveaux Principes cV Economic Politique. This vahiable 
writer seems to iiave been impressed with an exaggerated notion of the 
transient evils, and a faint one of the permanent benefits of machinery, and 
to be utterly unacquainted with those principles of the science, which place 
tliose benefits beyond controversy, (a) 



(tf) Our author, in his recent argument with Malthus, upon the subject 
of the excess of manufacturing power and produce, appears to me to have 
completely vindicated his own positions against the attacks of Sismondi and 
Malthus; and to have exposed the fallacy of the appalling doctrine, that the 
powers of human industry can ever be too great and too productive. — Vide 
Lettres a M. MuUhus. 



CHAP. VIII. ON PRODUCTION. 33 

The celebrated Adam Smith was the first to point out the im- 
mense increase of production, and the superior perfection of pro- 
ducts referable to this division of labour.* He has cited, among 
other examples, the manufacture of pins. The workmen occu- 
pied in this manufacture execute each but one part of a pin. One 
draws the wire, another cuts it, a third sharpens the points. The 



* Beccaria, in a public course of lectures on political economy, delivered 
at Milan in the year 1769, and before the publication of Smith's work, had 
remarked the favourable influence of the division of labour upon the multi- 
plication of products. These are his words : " Ciascuno prova colV esperien- 
za, che, applicando la mano e Vingegne sempre alio stesso genere di opere e 
di prodotti, egli piu facili, piu abondanti e migliori ne trova i resultati, di 
quello, che se ciascuno isolatamente le cose tutte a se necessarie soltanto fa- 
cesse ; onde altri pascono le pecore, altri ne cardano le lane, altri le tessono : 
chi coltiva Made, chine fa ilpane; chi veste, chi fahrica agli agricoltorie la- 
voranti; crescendo e concatenandosi le arti, e dividendosi in tal maniera, per 
la comune e privala utilita gli nomini in vane classi e condizioni." " We all 
know, by personal experience, that, by the continual application of the cor- 
poreal and intellectual faculties to one peculiar kind of work or product, we 
can obtain the product with more ease, and in greater abundance and per- 
fection, than if each were to depend upon his own exertions for all the ob- 
jects of his wants. For this reason, one man feeds sheep, a second cards 
the wool, and a third weaves it: one man cultivates wheat, another makes 
bread, another makes clothing or lodging for the cultivators and mechanics : 
this multiplication and concatenation of the arts, and division of mankind 
into a variety of classes and conditions, operating to promote both public 
and private welfare." 

However, I have given Smith the credit of originality in his ideas of the 
division of labour; first, because, in all probability, he had published his 
.opinions from his chair of professor of philosophy at Glasgow before Becca- 
ria, as it is well known he did the principles that form the ground-work of 
his book; but chiefly because he has the merit of having deduced from 
them the most important conclusions. (1) 



(1) [All tlie fundamental doctrines contained in the Inquiry into the 
Wealth of Nations, were comprehended in Dr. Smith's course of political 
lectures, delivered at Glasgow as early as the year 1752 ; " at a period, sure- 
ly," says DuGALD Stewart, " when there existed no French, (and he might 
have added, or Italian) performance on the subject, that could be of much 
use to him in guiding his researches." A short manuscript, drawn up by' 
Dr. Smith in the year 1755, fully establishes his exclusive claim to the most 
important opinions detailed in his treatise on the Wealth of Nations, which 
did not appear mitil the beginning of the year 1776. "A great part of the 
opinions enumerated in this paper, (he observes,) is treated of at length in 
some lectures which I have still by me, (1755,) and which were written in 
the hand of a clerk who left my service six years ago. They have all of 
them been the constant subject of my lectures, since I first taught Mr. 
Craigie's class, the first winter I spent in Glasgow, down to this day, with- 
out any considerable variation. They had all of them been the subject of 
lectures which I read at Edinburgh the winter before I left it, and I can 
adduce innumerable witnesses, both from that place and from this, wha 
will ascertain them sufficiently to be mine." Vide Mi*. Stewart's Account 
of the Life and Writings of Adam Smith, LL.D. read before the Royal So- 
ciety of Edinburgh, January 21, and March 18, 1793.] 

American Editor, 
13 



34 ON PRODUCTION. book s. 

head of a pin alone requires two or three distinct operations^ 
each performed by a different individual. By means of this di- 
vision, an ill appointed establishment, with but ten labourers em- 
ployed, could make 48,000 pins per day, by Smith's account. 
Whereas, if each person were obhged to finish off the pins one 
by one, going through every operation successively from first t& 
last, each would probably make but 20 per day, and the ten work- 
men would produce in the whole but 200, in lieu of 48,000. 
Smith attributes this prodigious difference to three causes : 

1. The improved dexterity, corporeal and intellectual, acquir- 
ed by frequent repetition of one simple operation. In some fa- 
brics the rapidity with which some, of the operations are perform- 
ed exceeds what the human hand could, by those who had never 
seen them, be supposed capable of acquiring. 

2. The saving of the time which is commonly lost in passing 
from one species of work to another, and in the change of place, 
position, and tools. The attention, which is always slowly trans- 
ferred, has no occasion to transport itself and settle upon a newt 
object. 

3. The invention of a great number of machines, which facili- 
tate and abridge labour in all its departments. For the division 
of labour naturally limits each operation to an extremely simple 
task, and one that is incessantly repeated ; which is precisely 
what machinery may most easily be made to perform. 

Besides, men soonest discover the methods of arriving at a 
particular end, when the end is approximate, and their atterition 
exclusively directed to it. Discoveries, even in the walk of phi- 
losophy, are for the most part referable, in their origin, to the 
subdivision of labour; because it is this subdivision that enables 
men to devote themselves to the exclusive pursuit of one branch 
of knowledge; which exclusive devotion has wonderfully favour- 
ed their advancement.* 

Thus the knowledge or theory necessary to the advancement 
of commercial industry for instance, attains a far greater degree 
of perfection, when different persons engage in the several studies, 
one of geography, with the view of ascertaining the respective 
position and products of different countries; another of politics, 
with a view to inform himself of their national laws and man- 
ners, and the advantages and disadvantages of commercial in- 
tercourse with them; a third of geometry and mechanics, by 
way of determining the preferable form of the ships, carriages, 
and machinery of all kinds, that must be employed ; a fourth of 

* But though many important discoveries in the arts have originated in 
division of labour, we must not refer to that source the actual products that 
have resulted, and will to eternity result, from those discoveries. The in- 
creased product must flow from the productive power of natural agents, no 
matter what may have been the occasion of our first becoming acquainted 
with the means of employing those agents. Vide si/^ra,, Chap,, IV^ 



^Hip. ^iii. ON PRODUCTION. m 

a^trenomj and natural philosophy, for the purposes of naviga- 
tion, &c. &c. 

Thus, too, the application of knowledge in the same depart- 
iment of commercial industry will obviously arrive at a higher de- 
gree of perfection, when divided amongst the several branches 
of internal, Mediterranean, East and West Indian, American, 
wholesale and retail, &c. &c. 

Moreover, such a division is no obstacle to the combination of 
operations not altogether incompatible, more especially if they 
aid and assist each other. There is no occasion for two diffe- 
rent merchants to conduct, one the trade of import for home con- 
sumption, and the other the trade of export of home products; 
because these operations far from clashing, mutually facilitate 
and assist each other, (a) 

The division of labour cheapens products, by raising a greater 
quantity at the same or a less charge of production. Competi- 
tion soon obliges the producer to lower the price to the whole 
amount of the saving effected ; so that he derives much less be- 
nefit than the consumer; and every obstacle the latter throws ia 
the way of that division is an injury to himself. 

Should a tailor try to make his own shoes as well as his coat, 
he would infallibly ruin himself* We see every day people 
acting as their own merchants, to avoid paying a regular trader 
the ordinary profit of his business; to use their own expression, 
with the view of pocketing that profit themselves. But this is 
an erroneous calculation; for this division of labour enables the 
regular dealer to execute the business for them mueh cheaper 
than they can do it themselves. Let them reckon up the trou- 
ble it costs them, the loss of time, the money thrown away in 
extra charges, which is always proportionally more in small than 
in large operations, and see if all these together do not amount 
to more than the two or three per cent, that might be saved on 
■every paltry item of consumption; even supposing them not to 
be deprived of what little advantage they might expect, by the 
avarice of the cultivator or manufacturer they would hav« to deal 

* The low price of sugar in China, is probably occasioned, in part, by the 
•circumstance of the grower leaving to a separate class the extraction of the 
sugar from the cane. This operation is performed by itinerant sugar press. 
ers, who go from house to house, 'offering their services, und provided with 
an extremely simple apparatus. Vide Macartney's Embassy, voL iv. p. 198. 



(fl) The combination of operations, which, at first sight, appears 1;o be dis- 
tinct, is far more practicable in what our author calls the branch of applica- 
tion, than in either the theoretical or the executive branch. A general mer- 
■chant, by means of clerks and brokers, will combine a vast variety of different 
■commercial operations, and yet prosper. Why? Because his own peculiar 
task is that of superintendence of commercial dealings ; which superinten- 
dence may be extended over a greater surface of dealing without incongru- 
ity, being on a closer inspection, but a repetition of the same operatioii. T- 



M ON PRODUCTION. book i. 

directly with, who will, of course impose, if he can, upon their 
inexperience. 

It is no advantage even to the cultivator or manufacturer him- 
self, except under very particular circumstances, to intrude upon 
the province of the merchant, and endeavour to deal directly 
with the consumer without his intervention. He would only di- 
vert his attention from his ordinary occupation, and lose time 
that might be far better employed in his own peculiar line; be- 
sides being under the necessity of keeping up an establishment 
of people, horses, carriages, &c. the expenses of which would 
far exceed the merchant's profit, reduced as it always must be 
by competition. 

The advantages accruing from division of labour can be en- 
joyed in respect of particular kinds of products only; and not in 
them, until their consumption has exceeded a certain point of 
extension. Ten workmen can make 48,000 pins in a day; but 
would hardly do so, unless where there was a daily consumption 
of pins to that amount; for, to arrive at this degree of division of 
labour, one workman must be wholly and exclusively occupied 
in sharpening the points, while the rest are severally engaged, 
each in a different part of the process. If there be a daily de- 
mand for no more than 24,000, he must needs lose half his 
day's work, or change his occupation; in which case, the divi- 
sion of labour will be less extensive and complete. 

For this reason, division of labour can not be carried to the 
extreme limit, except in products capable of distant transport and 
the consequent increase of consumption; or where manufacture 
is carried on amidst a dense population, offering an extensive 
local consumption. For the same reason too, many kinds of 
work, the products of which are destined to instantaneous con- 
sumption, are executed by the same individual, in places where 
the population is Umited. In a small town or village, the same 
person is often barber, surgeon, doctor, and apothecary; while 
in a populous city, and there only, these are not merely separate 
and distinct occupations, but some of them are again subdivided 
into several branches ; that of the surgeon, for instance, is split 
into the several occupations of dentist, oculist, accoucheur, &c.; 
each of which practitioners, by confining his practice to a single 
branch of this extensive art, acquires a degree of skill, which, 
but for this division, he could never attain. 

The same circumstance applies equally to commercial indus- 
try. Take the village grocer; the consumption of his groceries 
is so limited, as to oblige him to be at the same time haberdasher, 
stationer, inkeeper, and God knows what, perhaps even news- 
writer and publisher; whereas in large cities, not only grocery 
at large, but even the sale of a single article of grocery, is a great 
commercial concern. At Paris, London, and Amsterdam, there 
are shops, where nothing else is sold but the single article tea, 



CHAP. vin. ON PRODUCTICN. 37 

oil, or vinegar; and it is natural to suppose, that such shops have 
a much better assortment of the single article, than those deal- 
ing in many ditl'erent commodities at once. Thus, in a rich and 
populous country, the carrier, the wholesale, the intermediate, 
and the retail dtaler conduct each a separate branch of commer- 
cial uidustry, and conduct it with greater perfection as well as 
greater economy. Yet they ail benefit by this economy; and 
tliat they do so, if the explanations already given are not con- 
vincing, experience bears irrefragable testimony; for consumers 
always buy cheapest, where commercial industry is the most sub- 
divided. Ceteris paribus, a commodity brought from the same 
distance is sold cheaper at a large town or fair, than in a village 
or hamlet. 

The limited consumption of hamlets and villages, besides 
obliging dealers to combine many elsewhere distinct occupations, 
prevents many articles from finding a regular sale at all seasons. 
Some are not presented for sale at all, except on market or fair 
days; on such days the whole week's or perhaps year's con- 
sumption is laid in. On all other days, the dealer either travels 
elsewhere with his wares, or finds some other kind of occupation. 
In a very rich and very populous district, the consumption is so 
great, as to make the sale of one article only quite as much as a 
trader can manage, though he devote every day in the week to 
the business. Fairs and markets are expedients of an early 
stage of national prosperity; the trade by caravans of a still ear- 
lier stage of inter-national commerce; but even these expedients 
are far better than none at all.* 

From the necessity of the existence of a very extended con- 
sumption, before division of labour can be carried to its extreme 
point, it follows, that such division can never be introduced in the 
manufacture of products, which, from their high price, are placed 
within reach of few purchasers. In jewellery, especially of 
the better kinds, it is practised in a very limited degree ; and 
such division being, as we have seen, one cause of the invention 

* The country markets of France not only exhibit extreme inertness in 
particular channels of consumption ; but a very cursory observation is suf- 
ficient to show, that the sale of products in them is very limited, and the 
quality of what are sold very inferior. Besides the local products of the 
district, one sees nothing there, except a few tools, woollens, linens, and 
cottons of the most inferior quality. In a more advanced stage of prosperi- 
ty, one would find some few objects of gratification of wants peculiar to a 
more refined state of existence: some articles of furniture combining con- 
venience and elegance of form; woollens of some variety of fineness and 
pattern; articles of food of a more expensive kind, whether on account of 
their preparation or the distance they may have been brought from ; a few 
works of instruction or tasteful amusement; a few books besides mere al- 
manacks and prayer books. In a still more advanced stage, the consump- 
tion of all these things would be constant and extensive enough to support 
regular and well stocked shops in all these different lines. Of this degree 
of wealth examples are to be found in Europe, particularly in parts of Eng- 
Jand, Holland, and Germany. 



38 ON PRODUCTION. book i. 

and application of ingenious processes, it is not surprising that 
such processes are least often met with in the preparation of pro- 
ducts of highly finished workmanship. In visiting the workshop 
of a lapidary, one is often dazzled with the costliness of the ma- 
terials, and the skill and patience of the workman ; but it is only 
in the grand manufactories of articles of universal comsumption, 
that one is astonished with the display of ingenuity employed to 
give additional expedition and perfection to the product. In 
looking at an article of jewellery, it is easy to form an idea of 
tlie tools and processes, by means of which it has been execut- 
ed; whereas few people, on viewing a common stay-lace, would 
suppose it had been made by a horse or a current of water, which 
is actually the case. 

Of the three branches of industry, agriculture is the one that 
admits division of labour in the least degree. It is impossible to 
collect any great number of cultivators on the same spot, to use 
their joint exertions in the raising of one and the same product. 
The soil they work upon is extended over the whole surface of 
the globe, and obliges them to work at considerable distance 
from each other. Besides, agriculture does not allow of one 
person being continually employed in the same operation. One 
man can not be all the year ploughing or digging, any more than 
anotiier can find constant occupation in gathering in the crop. 
Moreover, it is very rarely that the whole of one's land can be 
devoted to the same kind of cultivation, or that the same kind of 
cultivation can be continued upon any one spot for many succes- 
sive years. The land would be exhausted; and, supposing the 
cultivation of the whole property to be uniform, yet even then, 
the preparing and dressing of the whole ground, and the getting 
in of the whole of the crops, would come on at the same time, 
and the labourers be unoccupied at other periods of the year.* 

Moreover the nature of his occupation and of agricultural pro- 
ducts makes it highly convenient for the cultivator to raise his 
own vegetables, fruit, and cattle, and even to manufacture part 
of the tools and utensils employed in his house-keeping; though 
in the other channels of industry, these items of consumption 
give exclusive occupation to a number of distinct classes. 

* It is not common to meet with such large concerns in agriculture, as 
in the brandies of commerce and manufacture, A farmer or proprietor sel- 
dom undertakes more than four or five hundred acres, and his concern, in 
point of capital and amount of produce, does not exceed that of a middling 
tradesman or manufacturer. This difference is attributable to many con- 
current causes; chiefly to the extensive area this branch of industry re- 
quires; to the bulky nature of the produce, and consequent difficulty of col- 
lecting it at one point from the distant parts of the farm, or sending it to 
very remote markets; to the nature of the business itself, which is not sus- 
ceptible of any regular and uniform system, and requires in the adventurer 
a succession of temporar}'' expedients and directions, suggested by the dif- 
ference of culture, of manuring and dressings, and the variety of each la- 
bourer's occupations, according to the season, the change of weather, &c. 



CHAP. viH. ON PRODUCTION. 39 

Where concerns of industry are carried on in manufactories, 
in which one and the same master-manufacturer conducts the 
product through all its stages, he can never establish any great 
subdivision of the various operations, without great command of 
capital. For such division requires larger advances of wages, 
of raw materials, and of tools and implements. Where eighteen 
workmen manufacture but twenty pins each per day, that is to 
say, in all 360 pins, weighing scarcely an ounce of metal, the 
daily advance of an ounce of fresh metal is enough to keep them 
in regular work. But if, in consequence of division of labour, 
these same eighteen persons can be brought, as we know they 
can, to produce 86,400 pins, the daily supply of raw material re- 
quisite for their regular employ will be 240 ounces weight of 
metal; consequently a much more considerable advance will be 
called for. If we further take into calculation, that there is an 
interval of probably a month or more, from the purchase of the 
metal by the manufacturer to the period of his reimbursement by 
the sale of his pins, we shall find that he must necessarily have 
at all times on hand, in different stages of progressive manufac- 
ture, 30 times 240 ounces of metal; in other words, the portion 
of his capital vested in raw material alone will amount to the va- 
lue of 450lbs. of metal. In addition to which, it must be ob- 
served, that the division of labour can not be effected without the 
aid of various implements and machines, that form themselves 
an important item of capital. Thus, in poor countries, we fre- 
quently find a product carried through all its stages, from first to 
last, by one and the same workman, from mere want of the capi- 
tal requisite for a judicious division of the different operations. 

We must not however suppose, that, to effect this division of 
labour, it is necessary the capital should be placed all in the 
hands of a single adventurer, or the business conducted all with- 
in the walls of one grand establishment. A pair of boots under- 
goes a variety of processes, whereof all are not executed by the 
bootmaker alone; the grazier, the tanner, the currier, all others, 
who immediately or remotely furnish any substance, or tool used 
in the making of boots, contribute to the raising of the product; 
and though there is a very considerable subdivision of labour in 
the making of this article, the greater part of the joint and con- 
current producers may have very little command of capital. 

Having detailed the advantages of the subdivision of the va- 
rious occupations of industry, and the extent to which it may be 
carried, the view of the suliject would be incomplete, were we 
to omit noticing, on the other hand, the inconveniences that in- 
separably attend it. 

A man, whose whole life is devoted to the execution of a sin- 
gle operation, will most assuredly acquire the faculty of execut- 
ing it better and quicker than others; but he will, at the same 
time, be rendered less fit for every other occupation^ corporeal 



40 ON PRODUCTION. book r. 

or intellectual; his other faculties will be gradually blunted or 
extinguished; and the man, as an individual, will degenerate in 
consequence. To have never done any thing but make the eigh- 
teenth part of a pin, is a sorry account for a human being to give 
of his existence. Nor is it to be imagined that this degeneracy 
from the digiuty of human nature is confined to the labourer, that 
plies all his life at the file or the hattimer; men, whose profes- 
sional duties call into play the finest faculties of the mind, are 
subject to similar degradation. This division of occupations has 
given rise to the profession of attornies, whose sole business it 
is to appear in the courts of justice in.-tead of the principals, and 
to follow up the different steps of the process on their behalf. 
These legal practitioners are, confessedly, seldom deficient in 
technical skill and ability; yet it is not uncommon to meet with 
men, even of eminence in this profession, wholly ignorant of the 
most simple processes of the manufactures they every day make 
u-seof; who, if ihey were set to work to mend the simplest arti- 
cle of their furniture, would scarcely know how to begin, and 
could probably not drive a nail, without exciting the risibihty of 
every awkward carpenter's apprentice; and if placed in a situa- 
tion of a greater emergency, called upon, for instance, to save a 
drowning friend, or to rescue a fellow townsman from a hostil© 
attack, would be in a truly distressing perplexity ; whereas a 
rough peasant, inhabiting a semi-barbarous district, would pro- 
bably extricate himself from a similar situation with honour. 

With regard to the labouring class, the incapacity for any 
other than a single occupation renders the condition of mere la- 
bourers more hard and wearisome, as well as less profitable. 
They have less means of enforcing their own right to an equita- 
ble portion of the gross value of the product. The workman, 
that carries about with him the whole implements of his trade, can 
change his locality at pleasure, and earn his subsistence, wher- 
ever he pleases: in the other case he is a mere adjective, with- 
out individual capacity, independence, or substantive importance, 
when separated from his fellow labourers, and obliged to accept 
whatever terms his employer thinks fit to impose. 

On the whole, we may conclude, that division of labour is a 
skilful mode of employing human agency, that it consequently 
multiplies the productions of society, in other words, the powers 
and the enjoyments of mankind; but that it in some degree de- 
grades the faculties of man in his individual capacity. (;a)(l) 



(a) This consideration makes it peculiarly incumbent upon the govern- 
ment of a manufacturing nation to diffuse the benefits of early education, 
and thus prevent the degeneration from being intellectual as well as corpo- 
real. T. 



(1) [" The extensive propagation of light and refinement," says Dogau* 
Stewart, " arising from the influence of the press, aided by the spirit of 



CHAP. IX. ON PRODUCTION. 41 



CHAPTER IX. 

OP THE DIFFERENT METHODS OF EMPLOYING COMMERCIAL INDUS- 
TRY, AND THE MODE IN WHICH THEY CONCUR IN PRODUCTION. 

Commodities are not all to be had in all places indifferently. 
The immediate products of the earth depend upon the local 
varieties of soil and climate ; and even the products of industry 
are met with only in such places as are most favourable to their 
production. 

Whence it follows, that, where products, whether of industry 
or of the earth, do not grow naturally, they cannot be introduced 
or produced in a perfect state, and fit for consumption, without 
undergoing a certain modification; that is to say, that of transport 
or conveyance. 

This transfer gives occupation to what has been called com- 
mercial industry. 

External commerce consists of the supply of the home mar 
ket with foreign, and of foreign markets with home products.* 

Internal commerce consists of the buying and re-selling of 
home products in the home markets. 

Wholesale commerce is the buying of large quantities, and re- 
selling to inferior dealers. 

Retail commerce is the buying of wholesale dealers, and re- 
selling to consumers. 

* Products that are bought to be re-sold, are called merchandise; and 
merchandise bought for consumption is denominated commodities, (a) 



(a) This distinction has been discarded in the translation, for the sake 
of simplification; the general term products being sufficiently intelligible 
and specific. T. . 



commerce, seems to be the remedy provided by nature, against the fatal ef- 
fects which would otherwise be produced, by the subdivision of labour ac- 
companying the progress of the mechanical arts : Nor is any thing wanting 
to make the remedy effectual, but wise institutions to facilitate general in- 
struction, and to adapt the education of individuals to the stations they are 
to occupy. The mind of the artist, which from the limited sphere of his ac- 
tivity, would sink below tlie level of the peasant or the savage, might re- 
ceive in infancy the means of intellectual enjoyment and the seeds of moral 
improvement ; and even the insipid uniformity of his professional engage- 
ments, by presenting no object to awaken his ingenuity or to distract his 
attention, might leave him at liberty to employ his faculties on subjects 
more interesting to himself, and more extensively usefiil to others."] 

AlMERICAN EpITOB. 

14 



42 ON PRODUCTION. book i. 

The commerce of money or specie is conducted by the 
banker, who receives or pays on account of other people, or gives 
bills, orders, or letters of credit, payable elsewhere than at the 
place where they are given. This is sometimes called the bank- 
ing trade, (a) 

The broker brings buyers and sellers together. 

The persons engaged in these several branches are all agents 
of commercial industry, whose agency tends to approximate pro- 
ducts to the hands of the ultimate consumer. The agency of the 
retailer of an ounce of pepper is quite as indispensable to the 
consumer, as that of the merchant, who despatches his vessel to 
the Moluccas for a cargo ; and the only reason why these differ- 
ent functions are not both performed by one and the same indivi- 
dual is, because they can be executed with more economy and 
convenience by two. To enter minutely into an examination 
of the limits and practices of these various departments of com- 
mercial industry, would be to write a treatise on commerce.* 
All we have to do in this work is, to inquire in what manner and 
degree they influence the production of values. 

In Book II., we shall see how the actual demand for a pro- 
duct, originating in its utility, is limited by the amount of the 
costs of production, and upon what principle its relative value is 
determined in each particular place. At present it is sufficient 
for the clear conception of commercial matters, to consider the 
value of a product as a given quantity or datum. Thus, without 
examining the reason why oil of olives is worth at Marseilles 
thirty, and at Paris forty sous per lb., I shall content myself with 
simply stating, that whoever etFects the transport of that article 
from Marseilles to Paris, thereby increases its value to the 
amount of ten sous per lb. Nor is it to be supposed, that its in- 
trinsic value has received no accession by the transit. That value 
has positively augmented. The intrinsic value of silver is greater 
at Paris than at Lima; and the cases are precisely similar. 

In fact, the transport of products can not be efi'ected without 
the concurrence of a variety of means, vv'hich have each an in- 
trinsic value of their own, and of which the actual transport itself, 
in the literal and confined sense of the term, is commonly not 
the most chargeable. There must be one commercial establish- 
ment at the place where the products are collected ; another at 
the place it is transported to ; besides package and warehousing. 

"*A complete treatise on commerce is still a desideratum in literatm-e, 
notwithstanding tlie labours of Melon and Forhonnais, for hitherto the 
principles and consequences of commerce have been little understood. 



(a) The banker's business is not confined to dealings in metal, coined or 
uncoined, but is extended to dealings in paper-money, and dealings in cre- 
dit, as we shall see when we come to the cliapter upon money, infra. T. 



CHAP. IX. ON PRODUCTION. 43 

There must be an advance of capital equivalent to the value 
transported. Moreover, there are agents, insurers, and brokers, 
to be paid. All these are really productive occupations, since, 
without their agency, the consumer can never enjoy the product; 
and supposing their remuneration to be reduced by competition 
to the lowest rate possible, he can be in no way cheaper supplied. 
In commercial, as well as manufacturing industry, the disco- 
very of a more economical or more expeditious process, the 
more skilful employment of natural agents, the substitution, for 
instance, of a canal in place of a road, or the removal of a diffi- 
culty interposed by nature or by human institutions, reduces the 
cost of production, and procures a gain to the consumer, without 
any consequent loss to the producer, who can lower his price 
without prejudice to himself, because his own outlay and advance 
are likewise reduced. 

The same principles govern both external and internal com- 
merce. The merchant that exports silks to Germany or to Rus- 
sia, and sells at Petersburgh for 8 fr. per yard, stuffs that have 
cost but 6 fr. at Lyons, creates a value of 2 fr. per yard. If the 
same merchant brings a return cargo of peltry from Russia, and 
sells at Havre for 1200 /r. what cost him at Riga but 1000 fr. 
or a value equivalent to 1000/r. there will be a new value of 200 
fr. created and shared amongst the different agents engaged in 
this production of value, whatever nation they may belong to, and 
whatever be the relative importance of their respective productive 
agency, from the first rate merchant to the ticket-porter inclusive.* 
And, by this creation of value, the wealth of the French nation is 
enriched to the amount of all the gains of French industry and of 
French capital, in the course of this production; and the Russian 
nation to the amount of those of Russian industry and Russian 
capital. Nay, perhaps a third nation, independent both of France 
and of Russia, may get the whole profit accruing from the mutual 
commercial intercourse between these nations ; and yet neither 
of them lose any thing, if their industry and capital have other 
equally lucrative employments at home. The very circumstance 
of the existence of an active external commerce, no matter what 
agents it be conducted by, is a very powerful stimulus to internal 
industry. The Chinese, who abandon the whole of their external 
commerce to other nations, must nevertheless raise an enormous 
gross product, otherwise they could never support, as they do, 
a population twice as large as that of all Europe, upon a surface 
of nearly equal extent. A shop-keeper in good business is quite 
as well off as a pedlar that travels the country with his wares on 
his back-f Commercial jealousy is, after all, nothing but preju- 

*The ordinary proportions of this division will be explained, infra. Book 
il. Chap. 7. 
t It has been often asked, Why not combine conamercial with agwcultu- 



44 ON PRODUCTION. book r. 

dice ; it is a wild fruit, that will drop of itself when it has arrived 
at maturity. 

The external commerce of all countries is inconsiderable, com- 
pared with the internal. To convince ourselves of the truth of 
this position, it will be sufficient to take note at all numerous or 
even sumptuous entertainments, how very small is the proportion 
of values of foreign growth, in comparison with those of home 
production ; especially, if we take into the account, as we ought 
to do, the value of buildings and habitations, which is necessarily 
of home production. *(a) 

The internal commerce of a country, though, from its minute 
ramification, it is less obvious and striking, besides being the 
most considerable, is Ukewise the most advantageous. (1) For 
both the remittances and returns of this commerce are necessa- 

ral and manufacturing productions? Why, for the same reason, that 
makes a wholesale cotton spinner, if he have a surplus of time and capital, 
more apt to extend his spinning concern, than to employ his labour and ca- 
pital in the working up of his own filature into muslin and printed calicos. 
* It would be impossible to estimate the proportion with any tolerable 
accuracy, even in countries, where calculations of this kind are most in 
vogue. Indeed, the attempt would be a sad waste of time. To say the 
truth, statistical statements are of little real utility; for, be their accuracy 
ever so well assured they can only be correct for the moment. The only 
knowledge really useful is, the knowledge of general principles and laws, 
that is to say, the knowledge of the connexion between cause and effect, 
which alone can safely teach Us what measures it is best to adopt in every 
possible emergency. The sole use of statistics in political economy is, to 
supply examples and illustrations of general principles. They can never 
be the basis of principles, which are grounded upon the nature of things; 
whereas statistics, in the most improved state, are only an index of their 
quantity. 



(a) This position may be correct or not, according to circimistances. 
The national wants must always, in the long rim, be supplied by the na- 
tional industry and exertions: but what is there to prevent a nation from 
exchanging the larger portion of its domestic products for the products of 
other nations ? The people of Tyre probably consumed more products of 
external, than of domestic industry, although indeed those external must 
have been- purchased with domestic products. Tyre, it is true, was rather 
& city than a nation. Holland resembled her in many particulars. The 
observation applies to every community, the chief part of whose production 
is, the modification of external products. T. 



(1) [The author has here, in common with Dr. Smith, fallen into an error. 
Capital, whether employed in the home or foreign trade, is equally produc- 
tive. If, for example, the' home trade realized greater profits than foreign 
commerce, every cent of capital employed in the latter, would in a very 
little time, be withdrawn from so comparatively disadvantageous an invest- 
ment. Capital will flow into the. foreign, instead of the home trade, only 
because it will thereby yield a larger profit. The internal commerce of a 
country can not therefore be said to be "the most advantageous."] 

American Editor. 



CHAP. IX. ON PRODUCTION. iS 

rily home products. It sets in motion a double production, and 
the profits of it are not participated with foreigners. For this 
reason, roads, canals, bridges, the abolition of internal duties,(a) 
tolls, duties on transit, (6) which are in effect tolls, every mea- 
sure, in short, which promotes internal circulation, is favourable 
to national wealth. 

There is a further branch of commerce, called the trade of 
speculation, which consists in the purchase of goods at one time, 
to be re-sold in the same place and condition at another time, 
when they are expected to be dearer. Even this trade is pro- 
ductive ; its utility consists in the employment of capital, ware- 
housfes, care in the preservation, in short, human industry in the 
withdrawing from circulation a commodity depressed in value 
by temporary superabundance, and thereby reduced in price 
below the charges of production, so as to discourage its produc- 
tion, with the design and purpose of restoring it to circulation 
when it shall become more scarce, and when its price shall be 
raised above the natural price, the charges of production, so as 
to throw a loss upon the consumers. The evident operation of 
this kind of trade is, to transport commodities in respect of time, 
instead of locality. If it prove an unprofitable or losing concern, 
it is a sign that it was useless in the particular instance, and 
that the commodity was not redundant at the time of purchase, 
and scarce at the time of re-sale. This operation has also been 
denominated, with much propriety, the trade of reserve, (c) Where 
it is directed to the buymg up of the whole of an article, for the 
sake of exacting an exorbitant monopoly price, it is called fore- 
stalling, which is happily difficult, in proportion as the national 
commerce is extensive, and, consequently, the commodities in 
circulation both abundant and various. 

The carrying trade, as Smith calls it, consists in the purchase 
of goods in one foreign market for re-sale in another foreign 
market. This class of industry is beneficial not only to the mer- 
chant that practises it, but also to the two nations between whom 
it is practised; and that for reasons which have been explained 
while treating of external commerce. The carrying trade is but 
little suited to nations possessed of small capital, whereof the 
whole is wanted to give activity to internal industry, which is al- 
ways entitled to the preference. The Dutch carry it on in ordi- 
nary times with advantage, because their population and capital 
are botli redundant, (cl) The French, in peace time, have car- 



(a) Douanes. (b) Octrois. 

(c) Commerce de reserve. There is no corresponding term in English; it 
is intelligible enough. T. 

{d) The carrying trade of Holland is now almost extinct. In fact, whe- 



46 ON PRODUCTION. book i. 

ried on a lucrative carrying trade between the different ports of 
the Levant; because adventurers could procure advances of ca- 
pital on better terms in France than in the Levant, and were 
perhaps less exposed to the oppression of the detestable govern- 
ment of that country. They have since been supplanted by 
other nations, whose possession of the carrying trade is so far 
from being an injury to the subjects of the Porte, that it actually 
keeps alive the little remaining industry of its territories. Some 
governments, less wise in this particular than the Turkish, have 
interdicted their carrying trade to foreign adventurers. If the na- 
tive traders can carry on the transport to greater profit than fo- 
reigners, there is no occasion to exclude the latter; and, if it- can 
be conducted cheaper by foreigners, their exclusion is a volunta- 
ry sacrifice of the profit of employing them. An example vi'ill 
serve to elucidate this position. The freight of hemp from Riga 
to Havre costs a Dutch skipper, say 35/r. per ton. It must be 
taken for granted, that no other but the Dutchman can carry it 
so cheap. He makes a tender to the French government, which 
is a consumer of Russian hemp, to provide tonnage at 40/r. per 
ton, thereby obviously securing to himself a profit of 5/r. per 
ton. Suppose then, that the French government, with a view to 
favour the national shipping, prefers to employ French tonnage, 
which can not be navigated for less than 50/r. per ton, or 55 /r., 
allowing the same profit to the ship-owner — What is the conse- 
quence? The government will be out of pocket 15 fr. per ton, 
for the mere purpose of giving a profit of 5 /r. to the national 
ship owners. And, as none but the individuals of the nation con- 
tribute towards the national expenditure, this operation will have 
cost to one class of Frenchmen 15 fr., for the purpose of giving 
to another class of Frenchmen a profit of 5/r. only. However 
the numbers may vary, the result must be similar; for there is 
but one fair way of stating the account. 

It is hardly necessary to caution the reader, that I have 
throughout been considering maritime industry solely in its rela- 
tion to national wealth. Its influence upon national security is 
another thing. The art of navigation is an expedient of war, as 
well as of commerce. The working of a vessel is a military 
manoeuvre; and the nation containing the larger proportion of 
seamen, is, therefore, ceteris paribus, the more powerful in a mi- 
litary point of view; consequently, political and military consi- 
derations have always interfered with national views of commerce 
in matters of navigation; and England, in passing her celebrated 
Navigation Act, interdicting her carrying trade to all vessels, the 

ther or no it be suited to a given nation at a given time, depends upon a 
great variety of circumstances. The advantage of the neutral character 
gave a very large proportion of it for some years to the American Unioiij 
though notoriously deficient in capital for the purposes of internal cultiva- 
tion. T. 



CHAP. IX. ON PRODUCTION. 47 

owners and at least three-fourths of the crews whereof were not 
British subjects, had in view, not so much the profits of the car- 
rying trade, as the increase of her own mihtary marine, and the 
diminution of that of the other powers, especially of Holland, 
which then enjoyed an immense carrying trade, and was the 
chief object of English jealousy. 

Nor can it be denied, that these views may actuate a wise na- 
tional administration ; assuming always, that it is an advantage 
to one nation to domineer over others. But these political dog- 
mas are fast growing obsolete. Policy will some day or other 
be held to consist in coveting the pre-eminence of merit rather 
than offeree. The love of domination never attains more than 
a factitious elevation, that is sure to make enemies of all its 
neighbours. It is this that engenders national debt, internal 
abuse, tyranny and revolution ; while the sense of mutual inte- 
rest begets international kindness, extends the sphere of useful 
intercourse, and leads to a prosperity, permanent, because it is 
natural.(l) 



(1) [The operation of the British Navigation-acts, like all other restric- 
tive regulations, has been prejudicial to the growth of the national wealth, 
without, at the same time, having contributed, in any degree to the estab- 
lishment of the naval preponderance of Great Britain. " If it can be made 
to appear," says a highly distinguished political economist, " that the 
greater wealth which we should, in the absence of these laws, have possess- 
ed, would have supplied a revenue adequate to the maintenance of an equal 
number of seamen in the navy, it would follow that we are no gainers by 
these acts ; and if it further appear that this additional revenue would have 
been equal to the maintenance of twice or three times as many seamen, it 
would be clear that we are losers hy them. It is acknowledged by many of 
the advocates for these laws, that their tendency has not been to increase 
the national revenue, but in some degree the reverse. 

" Our national preponderance," says, we believe, Mr. Horner, " rests on a 
very different basis. Our national energy and wealth originate in our free- 
dom, and in that security of property which is its happy consequence. The 
number of our seamen in merchant shipping is owing to the spirit and capi- 
tal of our traders, and to our great extent of coast. The magnitude of our 
navy is due neither to navigation-acts, nor to colonial monopolies, but to 
the resources of an industrious country. 

" How different are the ideas suggested by such observations, from the 
narrow theories of those who trace our naval superiority to the operation of 
a few acts of Parliament ! They remind us of the technical philosophy of the 
judge, who gravely ascribed the lamentable prevalence of duelling, not to 
the violence of human passions, but to a misapprehension of the law of the 
land! Besides, our naval greatness, as is well remarked by Dr. Smith, was 
conspicuous before our navigation laws were framed. It existed then, as it 
had done before, and has done since, in a degree commensurate with our 
commerce, and with the extent of our national prosperity. These circum- 
stances, and not navigation laws, will be found the regulators of naval power 
in all countries. They determined its extent among the Dutch, to whom, 
even in the season of their greatest strength, navigation laws were entirely 
unknown." Vide Edinburgh Review, vol. xiv. page 95.] 

American Editor. 



48 ON PRODUCTION. 



CHAPTER X. 

OP THE TRANSFORMATIONS UNDERGONE BY CAPITAL IN THE PRO- 
GRESS OF PRODUCTION. 

We have seen above (Chap, iii.) of what the productive capi- 
tal of a nation consists, and to what uses it is apphcable. So 
much it was necessary to specify, in enumerating the various 
means of production. We now come to consider and examine, 
what becomes of capital in the progress of production, and how 
it is perpetuated and increased. 

To avoid fatiguing the reader with abstract speculation, I shall 
begin with giving examples, which I shall take from every day's 
experience and observation. The general principles will follow 
of themselves, and the reader will immediately see their applica- 
bility to all other cases, which he may have occasion to pro- 
nounce a judgment upon. 

When the land-owner is himself the cultivator, he must pos- 
sess a capital over and above the value of his land ; that is to say, 
value to some amount or other consisting, in the first place, of 
clearance of the ground, together with works and erections 
thereon, which may at pleasure be looked upon as part of the 
value of ihe estate, but which are, nevertheless, the result of 
pre'vious human exertion, and an accession to the original value 
of the land.* 

This portion of his capital is little subject to wear and tear; 
trifling occasional repairs will preserve it entire. If the cultiva- 
tor obtain from the annual produce wherewithal to effect these 
repairs, this item of capital is thereby preservable in perpetuity. 

Ploughs, and other farming implements and utensils, together 
with the animals employed in tillage, form another item of the 
cultivator's capital, and an item of much quicker consumption, 
which, however, may in like manner be kept up and renovated, 
as occasion may require, at the expense of the annual produce 
of the concern, and thus be maintained at its full original amount. 
Finally, he must have stores of various kinds; seeds for his 

* Arthur Young, in his Vieio of the Agriculture of France, makes no esti- 
mate of this item of capital permanently vested in the land of France within 
its old limits ; but merely reckons it to be less than the capital so vested in 
England, in the proportion of 36 livres tonrnois per English acre. So that, 
in the very moderate supposition, that half as much capital is vested in per- 
manent amelioration of the land in France as in England, the capital so vest- 
ed in Old France, reckoned at 36 francs per acre, would amount, upon 131 
millions of acres, to 4716 millions of francs, for this item of French capital 
alone. 



CHAP. X. ON PRODUCTION. 49 

ground, provisions, fodder for his cattle, and food as well as mo- 
ney for his labourers' wages, &c.* Observe, that this branch of 
capital is totally decomposed once in the course of the year at 
least; and sometimes three or four times over. The money, 
grain, and provisions of every description, disappear altogether ; 
but so it must necessarily be; and yet not an atom of the capital 
is lost, if the cultivator, after subtracting from the produce a fair 
allowance for the productive service of his land (rent,) for the 
productive service of the capital embarked (interest,) and for the 
productive service of the personal labour that has set the whole 
in motion (wages,) contrive to make the annual produce replace 
the outlay of money, seed, live stock, &c., even to the article of 
manure, so as to put himself in possession of a value equal to 
what he started with the preceding year. 

Thus we find, that capital may yet be kept up, though almost 
every part of it have undergone some change, and many parts be 
completely annihilated ; for, indeed, capital consists not in this or 
that commodity or substance, but in its value. 

Nor is it difficult to conceive, that if the estate be sufficiently 
extensive, and managed with order, economy, and intelligence, 
the profits of the cultivator may enable him to lay by a surplus, 
after replacing the entire value of his capital, and defraying the 
expenses of himself and family. The mode of disposing of this 
surplus is of the utmost importance to the community, and will 
be treated of in the next chapter. All that is at present necessa- 
ry is, to impress a clear conviction, that the value of capital, 
though consumed, is yet not destroyed, wherever it has been 
consumed in such way as to reproduce itself; and that a con- 
cern may go on forever, and annually render a new product with 
the same capital, although that capital be in a perpetual course 
of consumption. 

After tracing capital through its various transformations in the 
department of agriculture, it will be easy to follow its transfor- 
mations in the other two departments of manufacture and com- 
merce. 

In manufacture, as well as agriculture, there are some branches 
of capital that last for years ; buildings and fixtures for instance, 
machinery and some kinds of tools; others, on the contrary, lose 
their form entirely; the oil and pot-ash used by soap makers 
cease to be oil and pot-ash when they assume the form of soap. 
In the same manner, the drugs employed in dyeing indigo cease 

* The same writer (Young) estimates, that in France, these two last 
items of capital, viz. implements, beasts of husbandry, stores of provisions, 
&c. may be set down at 48 francs per acre, one acre with another ; making 
an aggregate of 6288 millions of francs; which, added to the former esti- 
mate, shows a total of 11,000 millions of francs, capital engaged in the agri- 
cultural industry of Old France. He estimates the same items of capital 
in England at twice as much per acre. 

15 



5Q ON PRODUCTION. book i. 

to be Brazil wood or annatto, as the case may be, and are incor- 
porated with the fabric they are employed in colouring. And so 
of the wages and maintenance of the labourers. 

In commerce, almost the whole capital undergoes complete 
transmutation, and many items of it several times in the course 
of a year. A merchant exchanges his specie for woollens or 
jewellery, which is one change of form. He ships them for 
Turkey, and, on the voyage, some more of his money is convert- 
ed into the wages of the crew. The cargo arrives at Constanti- 
nople, where he sells the investment to the wholesale dealers, 
who pay him in bills upon Smyrna, which is a second metamor- 
phosis ; the capital embarked is now in the shape of bills, which 
he makes use of in the purchase of cotton at Smyrna; a third 
transformation. The cotton is shipped for France and sold 
there, which completes the fourth change of form ; thus repro- 
ducing the capital, most probably with profit, under its original 
shape of French coin. 

It is obvious, that the objects capable of acting the part of ca- 
pital are innumerable. If, at any given period, one wished to 
know what the capital of a nation consisted of, it would be found 
composed of an infinity of objects, commodities and substances, 
of which it would be impossible to guess the aggregate value 
with any tolerable accuracy, and of which some are situated 
many thousand leagues from its frontiers. At the same time, it 
appears that the most insignificant and perishable articles are a 
part, and often a very important part too, of the national capital; 
that, although the items of capital are in a continual course of 
consumption and decomposition, it by no means follows, that the 
capital itself is destroyed and consumed, provided that its value 
be preserved in some other shape; consequently, that the intro- 
duction or import of the vilest and most perishable commodities 
may be just as profitable, as that of the most costly and durable 
— gold or silver ; that, in fact, the former, are more profitable 
the instant they are more sought after; that the producers them- 
selves are the only competent judges of the transformation, ex- 
port, and import, of these various matters and commodities; and 
that every government which interferes, every system calculated 
to influence production, can only do mischief. 

There are concerns, in which the capital is completely reno- 
vated, and the work of production begun afresh, several times in 
the year. An operation of manufacture, that can be perfected 
and the product sold in three months, will admit of the capital 
being turned to account annually four times. It may be suppos- 
ed that the profit each time is less than when the capital is turn- 
ed but once in twelve months. Were it otherwise, there would 
be four times the profit gained ; an advantage that would soon 
attract an overthrow of capital in this particular channel, and 
lower the profit by competition. On the other hand, products 



CHAP. X. ON PRODUCTION. 51 

that it requires more than a year to perfect, such as leather, 
must, over and above the original capital, yield the profits of 
more than one year; otherwise, who could undertake to raise 
them l 

In the trade of Europe with China and the East Indies, the ca- 
pital embarked is two or three years before its return. Nor is it 
necessary in commerce or in manufacture, any more than in agri- 
culture, which has been cited as an example, that the capital 
should be realized in the form of money, to be entirely replaced. 
Merchants and manufacturers, for the most part, realize in this 
way the whole of their capital but once in their lives, and that is 
when they wind up and leave off business. Yet they are at no 
loss to discover at any time whether their capital be enlarged or 
diminished, by referring to the inventory of their assets for the 
time being. 

The capital employed on a productive operation is always a 
mere advance made for payment of productive services, and re- 
imbursed by the value of their resulting product. 

The miner extracts the ore from the bowels of the earth ; the- 
iron-founder pays him for it. Here ends the miner's production, 
which is paid for by an advance out of the capital of the iron- 
founder. This latter next smelts the ore, refines and makes it 
into steel, which he sells to the cutler: thus is the production of 
the founder paid, and his advance reimbursed by a second ad- 
vance on the part of the cutler, made in the price for the steel. 
This again the cutler works up into razor-blades, the price for 
which replaces his advance of capital, and at the same time pays 
for his productive agency. 

It is manifest, then, that the value of the ultimate product, 
razor-blades, has been sufficient to replace all the capital suc- 
cessively employed in its production, and, at the same time, to 
pay for the production itself; or rather, that the successive ad- 
vances of capital have paid for the productive services, and the 
price of the product has reimbursed those advances; which is 
precisely the same thing as if the aggregate or gross value of the 
product had gone immediately to defray the charges of its pro- 
duction. . 



CHAPTER XL 

OF THE FORMATION AND MULTIPLICATION OF CAPITAL. 

In the foregoing chapter, I have shown how productive capi- 
ta\, though kept during the progress of production, in a continual 
state of employment, and subject to perpetual change and wear. 



52 ON PRODUCTION. book i. 

is yet ultimately reproduced in full value, when the business of 
production is at an end. Since, then, wealth consists in the va- 
lue of matter or substance, not in the substance or matter itself, 
I trust my readers have clearly comprehended, that the produc- 
tive capital employed, notwithstanding its frequent transmuta- 
tions, is all the while the same capital. 

It will be conceived with equal facility, that, inasmuch as the 
value produced has replaced the value consumed, that produced 
value may be equal, inferior, or superior in amount, to the value 
consumed, according to circumstances. If equal, the capital has 
been merely replaced and kept up ; if inferior, the capital has 
been encroached upon ; but if superior, there has been an actual 
increase and accession of capital. This is precisely the point to 
which we traced the cultivator, cited by way of an example in 
the preceding chapter. We supposed him, after the complete 
re-establishment of his capital, bo as to put him in a condition to 
begin the new year's cultivation with equal means at his disposal, 
to have netted a surplus produce beyond his consumption of 
some value or other; say of 1000 crowns. 

Now, let us observe the various methods, in which he may 
dispose of this surplus of 1000 crowns; for, simple as the matter 
may appear to be, there is no point upon which more error has 
prevailed, or which has greater influence upon the condition of 
mankind. 

Whatever kind of produce this surplus, which we have valued 
at 1000 crowns, may consist of, the owner may exchange it for 
gold or silver specie, and bury it in the earth till he wants it again. 
Does the national capital suffer a loss of 1000 crowns by this 
operation? Certainly not; for we have just seen, that the value 
of that capital was before completely replaced. Has any one 
been injured to that amount? By no means; for he has neither 
robbed nor cheated any body, and has received no value what- 
ever, without giving an equivalent. It may be said perhaps, he 
has given wheat in exchange for the crowns he has thus buried, 
which wheat was very soon consumed; yet the 1000 crowns 
still continue withdrawn from the capital of the community. But 
I trust it will be recollected, that wheat as well as silver or gold, 
may compose a part of the national capital ; indeed, we have 
seen that national capital must necessarily consist, in a great 
measure, of wheat and such like substances, liable to either par- 
tial or total consumption without any diminution of capital there- 
upon; for, in short, that reproduction completely replaces the 
value ponsumed, including the profits of the producers, whose 
produclive agency is part of the value consumed. Wherefore, 
the instant that the cultivator has fully replaced his capital, and 
begins again with the same means as before, the 1000 crowns 
maybe thrown into the sea without reducing the national capital. 
But let us trace the disposal of this surplus of 1000 crowns to 



CHAP. XI. ON PRODUCTION. 53 

every imaginable destirmtion — Suppose, for instance, that, in- 
stead of being buried, they have been spent by the cultivator 
upon an elegant entertainment. In this case, this whole value 
has been destroyed in an afternoon; a sumptuous feast, a ball, 
and fireworks, will have swallowed up the whole. The value 
thus destroyed exists no longer in the community; it no longer 
forms an item in the aggregate of wealth; for those persons, 
into whose hands the identical pieces of silver have come, have 
given an equivalent in W'ines, refreshments, eatables, gunpowder, 
&c., all which values are reduced to nothing; the gross na- 
tional capital, however, is no more diminished in this case than 
in the former. A surplus value had been produced; and this 
surplus is all that has been destroyed, so that things remain just 
as they were. 

Again, suppose these 1000 crowns to have been spent in the 
purchase of furniture, plate, or linen. Still there is no reduction 
of national productive capital; although it must be allowed there 
is no accession ; for in this case, nothing more is gained than 
the a/lditional comforts the cultivator and his family derive from 
the newly purchased moveables. 

Fourthly and lastly, suppose the cultivator to add this excess 
of/lOOO crowns to his productive capital, that is to say, to re-em- 
ploy it in increasing the productive powers of his farm as circum- 
stances may require, in the purchase of more beasts of husband- 
ry, or the hire and support of more labourers; and in conse- 
quence, at the end of the year, to gather produce enough to 
replace the full value of the 1000 crowns, with a profit, in such 
manner as to make them capable of yielding a fresh product the 
year after, and so on every year to eternity. It is then, and then 
only, that the productive capital of the community is really aug- 
mented to that extent. 

It must on no account be overlooked, that, in one way or 
Qther, a saving such as that we have been speaking of, whether 
expended productively or unproductively, still is in all cases ex- 
pended and consumed ; and this is a truth, that must remove a 
notion extremely false, though very much in vogue — namely, 
that saving limits and injures consumption. No act of saving 
subtracts in the least from consumption, provided the thing saved 
be reinvested or restored to productive employment. On the 
contrary, it gives rise to a consumption perpetually renovated 
and recurring; whereas there is no repetition of an unproductive 
consumption, (a) 



(a) On the subject of saving, Sistnondi, and after him our own Malthus, 
have adopted a different opinion. According to them, the powers of pro- 
duction have already outrun the desire and the ability to consume ; conse- 
quently, every thing that tends to reduce that desire is injurious, because it 
is already too inert for the interests of production, wlierefore, inasmuch 



54 ON ^PRODUCTION. book i. 

It must be observed too, that the form in which the value 
saved, is so saved and re-employed productively, makes no es- 
sential difference. The saving is made with more or less ad- 
vantage, according to the circumstances and intelligence of the 
])erson making it. Nor is there any reason why this portion of 
capital should not have been accumulated, without ever having 
for a moment assumed the form of specie. It may be, that an 
actual product of the farm has been saved and resown or planted, 
without having undergone any transmutation; perhaps the wood, 
that might have been used as firing to warm superfluous apart- 
ments, may have been converted into palings or other carpen- 
ter's work; and what was cut down in the first instance as an 
item of revenue, be so employed, as to become an item of capi- 
tal. 

Now, the only way of augmenting the productive capital of 
individuals, as well as the aggregate productive capital of the 
community, is by this process of saving; in other words, of re- 
employing in production more products created than have been 
consumed in their creation. Productive capital can not be accu- 

as the desire of accumulation is the direct opposite to that of consumption, 
it must of necessity be injurious in the higliest degree. On these principles, 
it might be proved without difficulty, that the prodigality of public authoii- 
ty, war, or the poor law of England, is a national benefit : for all of theia 
stimulate consumption. Indeed, tliey leave their readers to draw this in- 
evitable conclusion; for they maintain in plain terms, that the enlargement 
of the productive powers of man, by the use of machinery or otherwise, 
makes the existence of unproductive consumers a matter, not of mere pos- 
sibility or probability, but of actual necessity and expedience. {Vide Sis- 
viondi, Nouv. Prin. liv. ii. c. 3. and liv. iv. c. 4. Malthus, Prin. of Pol. Econ.) 
These maxims would justify the prodigality of Louis XIV. of France, and 
of the Pitt system of England. But fortunately they are erroneous; and if 
the contrary principles laid down by our author here and infra, Chap. 15, 
needed further illustration or support, they have been rendered still more 
clear and convincing by his recent Lettres a M. Malthus. — It is true, that 
the enlargement of productive power naturally leads to the multiplication 
of unproductive consiuners : why ? because the desire of barren consump- 
tion, instead of being inert, is always active in the human breast. But that 
multiplication is not necessary; for the consumer may be made a producer, 
if not of material, at least of immaterial products, which latter are capable 
of infinitely more multiplication and variety, as well as of more general 
diffusion than material products. Wlrile this field remains open, a national 
admrnistration never need despair of finding occupation for the human la- 
bour supplanted by machinery. And what is the parsimony of modern 
days ? It is not the hoarding of coin or other valuables, which, though as 
our author observes, it subtracts nothing from the national capital, is yet a 
social mischief, because it suspends the utility of an existing product, or at 
any rate, prevents it from yielding the human gratification, which its bar- 
rc^n consumption would afford. The accumulations of the miser are now 
either vested in rej)roduction, which is beneficial; or in the ownership of 
the sources of production, land, &c. &c., which it matters not to public 
wealth wlio may be possessed of; or in the incumbrances of those sources, 
mortgages, national funds, &c. &c., which are but portions of that owner- 
ship, and to which the same observation applies. T. 



CHAP. XI, ON PRODUCTION. 55 

mulated by the mere scraping together of values without con- 
suming them; nor any otherwise, than by withdrawing them I'lom 
unproductive, and devoting them to reproductive consunipticjn. 
There is nothing odious in the real picture of tlie accumulation 
of capital; we shall presently see its happy consequences. 

The form, under which national capital is accumulated, is 
commonly determined by the respective geographical position, 
the moral character, and the peculiar wants of each nation. — 
The accumulations of a society in its early stages consist, for the 
most part, of buildings, implements of husbandry, live-stock, im- 
provements of land; those of a manufacturing people chiefly of 
raw materials, or such as are still in the hands of its workmen, 
in a more or less finished state; and in some part of the neces- 
sary manufacturing tools and machinery. In a nation devoted to 
commerce, capital is mostly accumulated in the form of wrought 
or unwrought goods, that have been bought by the merchant for 
the purpose of re-sale. 

A nation that directs its energies at the same time to all three 
branches of industry, agriculture, manufacture, and commerce, 
has a capital compounded of all these different classes of pro- 
duce, of that surprising quantity of stores of every kind, that we 
find civilized societies actually possessed of; which, by the in- 
telligent use that is made of them, are constantly renovated or 
even increased, in spite of their enormous consumption, provided 
that the industry of the community produce more than is destroy- 
ed by its consumption. 

I do not mean to say, that each nation has produced and laid 
by the identical articles that compose its actual capital. — Values, 
in some shape or other, have been produced and laid by; and 
these, by various transmutations, have assumed the form most 
convenient for the time being. A bushel of wheat saved will 
feed a mason as well as a worker in embroidery. — In the one 
case, the bushel of wheat will be reproduced in the shape of the 
masonry of a house; in the other, under that of a laced suit. 

Every adventurer in industry, that has a capital of his own 
embarked in it, has ready means of employing his saving pro- 
ductively; if engaged in husbandry, he buys fresh parcels of 
land; or, by judicious outlays and improvements, augments the 
productive powers of what already belongs to him; if in trade, 
he buys and sells a greater quantity of merchandise. Capitalists 
have nearly the same advantage : they invest their whole savings 
in the same manner as their former capital is invested, and in- 
crease it pro tanto, or look out for new ways of investment, which 
they are at no loss to discover; for the moment they are known 
to be possessed of loose funds, they seldom have to wait for pro- 
positions for the employment of them ; whereas the proprietors 
of lands let out to farm, and individuals that live upon fixed in- 
come, or the wages of their personal labour, have not equal 



56 ON PRODUCTION. book i. 

facility in the advantageous disposal of their savings, and can 
seldom invest them till they amount to a good round sum. Many 
savings are therefore consumed, that might otherwise have 
swelled the capitals of individuals, and consequently of the na- 
tion at large. Banks and associations, whose object is to re- 
ceive, collect, and turn to profit the smail savings of individuals, 
are consequently very favourable to the multiplication of capital, 
whenever they are perfectly secure. 

The increase of capital is naturally slow of progress : for it 
can never take place without actual production of value, and the 
creation of value is the work of time and labour, besides other 
ingredients.* Since the producers are compelled to consume 
values all the while they are engaged in the creation of fresh 
ones, the utmost they can accumulate, that is to say, add to 
reproductive capital, is the value they produce beyond what they 
consume; and the sum of this surplus is all the additional wealth 
that the public or individuals can acquire. The more values are 
saved and reproductively employed in the year, the more rapid is 
the national progress towards prosperity. Its capital is swelled, 
a larger quantity of industry is set in motion, and saving be- 
comes more and more practicable, because the additional capital 
and industry are additional means of production. 

Every saving or increase of capital lays the groundwork of a 
perpetual annual profit, not only to the saver himself, but like- 
wise to all those whose industry is set in motion by this item of 
new capital. It is for this reason, that the celebrated Adam 
Smith likens the frugal man, who enlarges his productive capital 
but in a solitary instance, to the founder of an alms-house for 
the perpetual support of a body of labouring persons upon the 
fruits of their own labour; and on the other hand, compares the 
prodigal that encroaches upon his capital, to the roguish steward 
that should squander the funds of a charitable institution, and 
leave destitute, not merely those that derived present subsistence 
from it, but likewise all who might derive it hereafter. He pro- 
nounces without reserve every prodigal to be a public pest, and 
every careful and frugal person to be a benefactor of society.j" 

* The savings of a rich contractor, of a swindler or cheat, of a royal fa- 
vourite, saturated with grants, pensions, and unmerited emoluments, are 
actual accumulations of capital, and are sometimes made with facility- 
enough. But the values thus amassed by a privileged few, are, in reality, 
the product of the labour, capital and land, of numbers, who might them- 
selves have made the saving, and turned it to their own account, but for 
the spoliation of injustice, fraud, or violence. 

t Wealth of Nations, b. ii. c. .3. Lord Lauderdale, in a work entitled, 
" Enquiry into the Nature and Origin of Fublic Wealth,^'' has proved to his 
own conviction, in opposition to Smith, that the accumulation of capital is 
adverse to the i)ici'ease of wealth : grounding his argument on the position, 
that such accumulation witlidraws from circulation values which would be 
serviceable to industry. But this position is untenable. Neither productive 
capital, nor the additions made to it, are withdrawn from circulation ; other- 



CHAP. XI. ON PRODUCTION. 5t 

It is fortunate, that self interest is always on the watch to pre- 
serve the capital of individuals; and that capital can at no time 
be withdrawn from productive employment, without a proportioa- 
ate loss of revenue. 

Smith is of opinion, that, in every country, the profusion and 
ignorance of individuals and of the pubHc authorities is more 
than compensated by the prevalent frugality of the people at 
large, and by their careful attention to their own interests.* At 
least it seems undeniable, that almost all the nations of Europe 
are at this moment advancing in opulence; which could not be 
the case, unless each of them, taken in the aggregate, produced 
more than it consumed unproductively."}" Even the revolutions 
of modern times appear to have been rather favourable than 
otherwise to the progress of opulence ; for they are no longer, 
as in ancient days, followed by continued hostile invasion, or 
universal and protracted pillage; whereas, on the other hand, 
they have commonly overthrown the barriers of prejudice, and 
opened a wider field for talent and enterprise. But it is still a 
question, whether this frugahty, w^hich Smith gives individuals 
credit for, be not, in the most numerous classes of society, a 
forced consequence of a vicious political organization. It is 
true, that those classes receive their fair proportion of the gross 
produce, in return for their productive exertions. How many 
individuals live in constant penury, in. the countries considered 

wise they would remain inactive, and yield no profit whatever. On the con- 
trary, the adventurer in industry, who makes use of it, employs, disposes of, 
and wholly consumes it, but in a way that reproduces it, and that with pro- 
fit. I have noted this error of his lordship, because it has been made the 
basis of other works on political economy, which abound in false conclusions, 
having set out on this false principle. 

* Wealth of Nations, b. ii, c 3, 

t Except during the continuance of ruinous wars, or excessive public ex- 
travagance, such as occurred in France under the domination of Napoleon. 
It can not be doubted, that, at that disastrous period of her history, even in 
the moments of her most brilliant military successes, the amount of capital 
dilapidated, exceeded the aggregate of savings. Requisitions and the havoc 
of war, in addition to the compulsory expenditure of individuals, and the 
pressure of exorbitant taxation, must unquestionably have destroyed more 
values, than the exertions of individual economjr could devote to reproduc- 
tive investment. The sovereign, wholly ignorant of political economy him- 
self, and consequently affecting to despise its suggestions, encouraged his 
tiourtiers, like himself, to squander the enormous revenues derived from his 
favour, in the apprehension that wealth might make them independent, (a) 



(a) Whatever might be her momentary losses, France is rapidly recover- 
ing; while her rival continues so exhausted, that there are serious doubts, 
whether she will have strength to carry her through. During the war, her 
savings certainly exceeded her expenditure, and her productive means 
were progressively expending. With a reduced expenditure, and the same 
productive means, it is now very doubtful, whether her production be not 
actually on the decline. According to our author's principles, this must be 
She fault of her rulers. T. 

16 



58 ON PRODUCTION. book i. 

as the most wealthy! How many families are there, both in 
town and country, whose whole existence is a succession of pri- 
vations; who, with every thing around them to awaken their 
desires, are reduced to the satisfaction of the very lowest wants, 
as if they lived in an age of the grossest barbarism and national 
poverty! 

Thus I am forced to infer, that, though unquestionably there 
is an annual saving of produce in almost all the nations of Eu- 
rope, this saving is extorted much more commonly from urgent 
and natural wants, than from the consumption of superfluities, 
to which policy and humanity would hope to trace, it. Whence 
arises a strong suspicion of some radical defect in the policy and 
internal economical systems of most of their governments. 

Again, Smith thinks that the moderns are indebted for their 
comparative opulence, rather to the prevalence of individual fru- 
gality, than to the enlargement of productive power. I admit, 
that some absurd kinds of profusion are more rare now-a-days 
than formerly ;* but it should be recollected, that such profusion 
can never be practised, except by a very small number of per- 
sons; and if we take the pains to consider how widely the enjoy- 
ment of a more abundant and varied consumption is diffused, 
particularly among the middle classes of society, I think it will 
be found, that consumption and frugality have increased both 
together ; for they are by no means incompatible. How many 
concerns are there in every branch of industry, that, in times of 
prosperity, yield enough produce to the adventurers to enable 
them to enlarge both their expenses and their savings ? "What 
is true of one particular concern, may possibly be true of the na- 
tional production in the aggregate. The wealth of France was 
progressively increasing during the first forty years of the reign 

* It is not, however, to bo supposed, that the internal economy of ancient 
and of modern states is so widely different as some may be led to imagine. 
There is a striking similarity between the rise and fall of the opulent cities 
of Tyre, Carthage, and Alexandria, and those of the Venitian, Florentine, 
Genoese, and Dutch republics. The same cause must ever be attended with 
the same effect. We read of the wonderful riches of Croesus, king of Lydia, 
even before his conquest of some neighbouring states: whence we may 
infer, that the Lydians were an industrious and frugal people ; for a king 
can draw his resources solely from his subjects. The dry study of political 
eoonomy would lead to this inference; but it happens to be also confirmed 
by tlie historical testimony of Justin, who calls the Lydians a people once 
powerful in the resources of industry; (g-ens industrid quondam potens ;) 
and gives a notion of their enterprising character, when he tells us, that 
Cyrus did not complete their subjugation, until he had habituated them to 
indolence, gaming, and debauchery. {Jussiquc cauponias et ludicras artes 
et lenocinia exercere.) It is clear, therefore, that they must have before 
been possessed of the opposite qualities. Had Croesus not taken a turn for 
pomp and military renown, he would probably have remained a powerful 
monarch, instead of ending his days in misfortune. The art of connecting 
en.use with effect, and the study of political economy, are probably as con- 
ducive to the personal welfare of kings, as to tliat of their subjects. 



CHAP, XI. ON PRODUCTION. 69 

of Louis XIV., in spite of the profusion, public and private, that 
the splendour of the court occasioned. Th^ stimulus given to 
production by Colbert multiplied her resources faster than the 
court squandered them. Some people supposed, that this very 
prodigality was the cause of their multiplication; the gross fallacy 
of which notion is demonstrated by the circumstance, that, after 
the death of that minister, the extravagancies of the court conti- 
nuing at the same rate, and the progress of production being un- 
able to keep pace with them, the kingdom was reduced to an 
alarming state of exhaustion. The close of that reign was the 
most gloomy that can be imagined. 

After the death of Louis XIV., the public and private expendi- 
ture of France have been still further increasing ;* and to me it 
appears indisputable, that her national wealth has advanced like- 
wise: Smith himself admits that it did; and what is true of France 
is so of most of the other states of Europe in some degree or 
other. 

Turgotf falls in with Smith's opinion. He expresses his be- 
lief, that frugality is more generally prevalent now than in former 
times, and gives the following reasons : that, in most European 
countries, the interest of money was, on the average, lower than 
it had ever before been, a clear proof of the greater abundance 
of capital ; therefore, that greater frugality must have been exert- 
ed in the accumulation of that capital, than at any former period: 
and, certainly, the low rate of interest proves the existence of 
more abundant capital ; but it proves nothing with regard to the 
manner of its acquirement : in fact, it may have been acquired 
just as well by enlarged production as by greater frugaUty, as I 
have just been demonstrating. 

However, I am far from denying,. that, in many particulars, 
the moderns have improved the art of saving as well as that of 
producing. A man is not easily satisfied with less gratifications 
than he has been accustomed to ; but there are many which he 
has learnt to procure at a cheaper rate. For instance, what can 
be more beautiful than the coloured furniture papers that adorn 
the walls of our apartments, combining the graces of design with 
the freshness of colouring? Formerly, many of those classes of 
society that now make use of paper hangings, were content with 
whitewashed walls, or a coarse ill-executed tapestry, infinitely 
dearer than the modern paperings. By the recent discovery of 

*TIiis increase of expenditure has been not altogether nominal, and con- 
sequential upon the reduction in the standard of the silver coinage of France ; 
a greater quantity and variety of products was consumed, and those of a 
better and more expensive quality. And though refined silver is novs^ in- 
trinsically worth nearly as much as in the days of Louis XIV., since the 
same weight of silver is given for the same quantity of wheat ; yet the same 
ranks of society now actually expend more silver in weight as well as in 
denomination. 
. \ Reflex sur la Form, et la Distrib. des Rich. § 81. 



60 ON PRODUCTION. book u 

the efficacy of sulphuric acid in destroying the mucilaginous par- 
ticles of vegetable oils, they have been rendered serviceable ia 
lamps on the Argand principle of a double current of air, which 
before could only be lighted with fish oil, twice or thrice as dear. 
This discovery has of itself placed the use of those lamps, and 
the fine light they give, within reach of almost every class.* 

For this improvement in frugality, we are indebted to the ad- 
vances of industry, which has, on the one hand, discovered a 
great number of economical processes ; and, on the other, every 
where solicited the loan of capital, and tempted the holders of 
it, great or small, by better terms and greater security. In times 
when little industry existed, capital, being unprofitable, was sel- 
dom in any other shape than that of a hoard of specie locked up 
in a strong box, or buried in the earth as a reserve against emer- 
gency: however considerable in amount, it yielded no sort of be- 
nefit whatever, being in fact little else than a mere precautionary 
deposit, great or small. But the moment that this hoard was 
found capable of yielding a profit proportionate to its magnitude, 
its possessor had a double motive for increasing it, and that not 
of remote or precautionary, but of actual, immediate benefit ; 
since the profit yielded by the capital might, without the least 
diminution of it, be consumed and procure additional gratifica- 
tions. Thenceforward it became an object of greater and more 
general solicitude than before, in those that had none to create, 
and in those that had one to augment, productive capital ; and a 
capital, bearing interest began to be regarded as a property 
equally lucrative, and sometimes equally substantial with land 
yielding rent. To such as regard the accumulation of capital as 
an evil, inasmuch as it tends to aggravate the inequality of human 
fortune, I would suggest, that, if accumulation has a constant 
tendency to the multiplying of large fortunes, the course of nature 
has an equal tendency to divide them again. A man, whose life 
has been spent in augmenting his own capital and that of his 
country, must die at last, and the succession rarely devolves upon 
a sole heir or legatee, except where the national laws sanction 
entails and the right of primogeniture. In countries exempt 
from the baneful influence of such institutions, where nature is 
left to its own free and beneficent action, wealth is naturally dif- 
fused by subdivision through all the ramifications of the social 
tree, carrying health and hfe to the furthest extremities."!" The 

*It is to be feared, that taxation will ultimately deprive the consumer of 
the advantage of such improvements. The increase of the internal taxes 
(droits reunis), of the stamps on patents, of the taxes and impediments af- 
fecting the internal transport of commodities, have already brought the 
price of these vegetable oils almost to a par with the article they had so 
beneficially supplanted. 

t It is to be regretted, that people should be so little attentive to merit 
in their testamentary dispositions. There is always a degree of discredit 
thrown upon the memory of a testator, by his bounty to an unworthy ob- 



CHAP. XI. ON PRODUCTION. 61 

total capital of the nation is enlarged, at the same time that the 
capital of individuals is subdivided. 

Thus the growing vi'ealth of an individual, when honestly ac- 
quired and reproductively employed, far from being viewed with 
jealous eyes, ought to be hailed as a source of general prosperity. 
I say honestly acquired, because a fortune amassed by rapine or 
extortion is no addition to the national stock ; it is rather a 
portion of capital transferred from the hands of one man, where 
it already existed, to those of another, who has exerted no pro- 
ductive industry. On the contrary, it is but too common, that 
wealth ill-gotten is ill-spent also. 

The faculty of amassing capital, or, in other words, value, 
I apprehend to be one cause of the vast superiority of man over 
the brute creation. Capital, taken in the aggregate, is a power- 
ful engine consigned to the use of man alone. He can direct 
towards any one channel of employment the successive accumu- 
lations of many generations. Other animals can command, at 
most, no more than their respective individual accumulations, 
scraped together in the course of a few days, or a season at the 
utmost, which can never amount to any thing considerable : so 
that, granting them a degree of intelligence they do not seem 
possessed of, that intelligence would yet remain ineffectual, for 
want of the materials to set it in motion. 

Moreover, it may be remarked, that the powers of man, result- 
ing from the faculty of amassing capital, are absolutely indefina- 
ble; because there is no assignable limit to the capital he may ac- 
cumulate, with the aid of time, industry, and frugality. 

ject ; and, on the contrary, nothing endears him more to the survivors than 
a bequest dictated by public spirit, or the love of private virtue. The foun- 
dation of a hospital, of an establishment for the education of the poor, of a 
perpetual premium for good actions, or a bequest to a writer of eminent 
merit, extends the influence of the vs^ealthy beyond the limits of mortality, 
and enrols his name in the records of honour.(a) 



(a) This laudable ambition is always proportionate to the wealth ; the 
civil liberty, and the intelligence of a nation. In England, scarcely a year 
passes over our heads without more than one instance of useful and exten- 
sive munificence. The bequests to the elder Pittj to Wilberforce, and other 
public men, the frequent foundations and enlargements of institutions of 
relief or education, reflect equal honour on the character of the nation, and 
the memory of the individuals. T. 



62 ON PRODUCTION. 



CHAPTER XII. 

OF UNPRODUCTIVE CAPITAL. 

We have seen above, that values once produced may be de- 
voted, either to the satisfaction of the wants of those who have 
acquired them, or to a further act of production. They may 
also be withdrawn both from unproductive consumption and from 
reproductive employment, and remain buried or concealed. 

The owner of values, in so disposing of them, not only de- 
prives himself of the self-gratification he might have derived from 
their consumption, but also of the advantage he might draw from 
the productive agency of the value hoarded. He furthermore 
withholds from industry the profits it might make by the employ- 
ment of that value. 

Amongst abundance of other causes of the misery and weak- 
ness of the countries subjected to the Ottoman dominion, it can 
not be doubted, that one of the principal is, the vast quantity of 
capital remaining in a state of inactivity. The general distrust 
and uncertainty of the future induce people of every rank, from 
the peasant to the pacha, to withdraw a part of their property 
from the greedy eyes of power: and value can never be invisible, 
without being inactive. This misfortune is common to all coun- 
tries, where the government is arbitrary, though in different de- 
grees proportionate to the severity of despotism. For the same 
reason, during the violence of political convulsions, there is 
always a sensible contraction of capital, a stagnation of industry, 
a disappearance of profit, and a general depression while the 
alarm continues : and, on the contrary, an instantaneous energy 
and activity highly favourable to public prosperity, upon the re- 
establishment of confidence. The saints and madonnas of su- 
perstitious nations, the splendd pageantry and richly decorated 
idols of Asiatic worship, gave life to no agricultural or manufac- 
turing enterprise. The riches of the fane and the time lost in 
adoration would really purchase the blessings, that barren prayers 
can never extort from the object of idolatry. There is a great 
deal of inert capital in countries, where the national habits lead 
to the extended use of the precious metals in furniture, clothes, 
and decorations. The silly admiration bestowed by the lower 
orders on the display of such idle and unproductive finery, is hos- 
tile to their own interests. For the opulent individual, who vests 
100,000 fr. in gilding, plate, and the splendour of his establish- 
ment, has it not to lay out at interest, and withdraws it from the 
support of industry of any kind. The nation loses the annual 



GHAP. XII. ON PRODUCTION. 63 

revenue of so much capital, and the annual profit of the industry 
it mifrht have kept in activity. 

Hitiierto we have been considering that kind of value only, 
which is capable, after its creation, of being as it were, incor- 
porated with matter, and preserved for a longer or shorter pe- 
riod. But all the values producible by human industry, have 
not this quality. Some there are, which must have reality, be- 
cause they are in high estimation, and purchased by the exchange 
of costly and durable products, which nevertheless have them- 
selves no durabihty, but perish the moment of their production. 
This class of values I shall define in the ensuing chapter, and 
denominate immatetial products.* 



OF IMMATERIAL PRODUCTS, OR VALUES CONSUMED AT THE MO- 
MENT OF PRODUCTION. 

A PHYSICIAN goes to visit a sick person, observes the symp- 
toms of disease, prescribes a remedy, and takes his leave with- 
out depositing any product, that the invalid or his family can 
transfer to a third person, or even keep for the consumption of a 
future day. 

Has the industry of the physician been unproductive? Who 
can for a moment suppose so? The patient's life has been saved 
perhaps. Was this product incapable of becoming an object of 
barter? By no means ; the physician's advice has been exchang- 
ed for his fee ; but the want of this advice ceased the moment it 
was given. The act of giving was its production, of hearing its con- 
sumption, and the consumption and production were simultaneous. 

This is what I call an immaterial product. 

The industry of a musician or an actor yields a product of the 
same kind : it gives one an amusement, a pleasure one can not 
possibly retain or preserve for future consumption, or as the ob- 
ject of barter for other enjoyments. This pleasure has its price 
it is true : but it has no further existence, except perhaps in the 
memory, and no exchangeable value, after the instant of its pro- 
duction. 

Smith will not allow the name of products to the results of 
these branches of industry. Labour so bestowed he calls unpro- 

* It was my first intention to call these perishahle products, but this term 
would be equally applicable to products of a material kind. Intransferable 
wovdd be equally incorrect, for this class of products does pass from the 
producer to the consumer. The word transient, does not exclude all idea 
of duration whatever, neither does the word momentary. 



64 ON PRODUCTION. book i. 

cluctive ; an error ho was led info by his definition of wealth, 
which he defines to consist of things bearing a value capable of 
being preserved, instead of extending the name to all things 
bearing exchangeable value : consequently, excluding products 
consumed as soon as created. The industry of the physician, 
however, as well as that of the public functionary, the advocate 
or the judge, which are all of them of the same class, satisfies 
wants of so essential a nature, that without those professions no 
society could exist. Are not, then, the fruits of their labour 
real? They are so far so, as to be purchased at the price of other 
and material products, which Smith allows to be wealth ; and by 
the repetition of this kind of barter, the producers of immaterial 
products acquire fortunes.* 

To descend to items of pure amusement, it can not be denied, 
that the representation of a good comedy gives as solid a plea- 
sure, as a box of comfits, or a discharge of fire-works, which are 
products,even within Smith's definition. Nor can I discover any 
sound reason, why the talent of the painter should be deemed pro- 
ductive, and not the talent of the musician. f 

Smith himself has exposed the error of the economists in con- 
fining the term, wealth, to the mere value of the raw material 
contained in each product ; he advanced a great step in political 
economy, by demonstrating wealth to consist of the raw mate- 
rial, plus, the value added to it by industry ; but, having gone so 
far as to promote to the rank of wealth an abstract commodity, 
value, why reckon it as nothing, however real and exchangeable, 
when not incorporated in matter? This is the more surprising, 
because he went so far as to treat of labour, abstracted from the 
matter wherein it is employed; to examine the causes which ope- 
rate upon and influence its value ; and even to propose that 
value as the safest and least variable measure of all other values. J 

The nature of immaterial products makes it impossible ever 
to accumulate them, so as to render them a part of the national 
capital. A people containing a host of musicians, priests, and 

* Wherefore de Verri is wrong in asserting, that the occupations of the 
sovereign, the magistrate, the soldier, and the priest, do not fall within the 
cognizance of political economy. {Meditazioni sulla Economia Folitica. 
§■24.) _ 

t This error has already been pointed out by M. Germain Gamier, in the 
notes to his French translation of Smith. 

I Some writers, who have probably taken but a cursory view of the posi- 
tions here laid down, still j)ersist in setting d-own the producers of imma- 
terial products amongst the unproductive labourers. But it is vain to strug- 
gle against the nature of things. Those at all conversant with the science 
of political economy, are compelled to yield involuntary homage to its prin- 
ciples. Thus Sismondi, after having spoken of .the values expended in the 
wages of unproductive labourers, goes on to say, " Ce sont des consumma- 
tions rapides qui suivent iimnediatement la production." Nouv. Princ. tom. 
ii. p. 203, admitting a production by those he had pronounced to be unpro- 
ductive ; 



CHAP. XIII. ON PRODUCTION. 65 

public functionaries, might be abundantly amused, well versed in 
religious doctrines, and admirably governed ; but that is all. Its 
capital would receive no direct accession from the total labour of 
all these individuals, though industrious enough in their respect- 
ive vocations, because their products would be consumed as fast 
as produced. 

Consequently, nothing is gained on the score of public pros- 
perity, by ingeniously creating an unnatural demand for the la- 
bour of any of these professions : the labour diverted into that 
channel of production can not be increased, without increasing 
the consumption also. If this consumption yield a gratification, 
then indeed we may console ourselves for the sacrifice; but when 
that consumption is itself an evil, it must be confessed the system 
which causes it is deplorable enough. 

This occurs in practice, whenever legislation is too compli- 
cated. The study of the law, becoming more intricate and 
tedious, occupies more persons, whose labour must likewise 
be better paid. What does society gain by this 1 are the respect- 
ive rights of its members better protected 1 Undoubtedly not : 
the intricacy of law, on the contrary, holds out a great encou- 
ragement to fraud, by multiplying the chances of evasion, and 
very rarely adds to the solidity of title or of right. The only 
advantage is, the greater frequency and duration of suits. The 
same reasoning applies to superfluous ofiices in the public admi- 
nistration. To create an office for the administration of what 
ought to be left to itself, is, to do an injury to the subject in the 
first instance, and make him pay for it afterwards as if it were a 
benefit.* 

Wherefore it is impossible to admit the inference off M. Gar- 
nier, that because the labour of physicians, lawyers, and the like 
is productive, therefore a nation gains as much by the multipli- 
cation of that class of labour as of any other. This would be 
the same as bestowing upon a material product more manual la- 
bour than is necessary for its completion. The labour produc- 
tive of immaterial products, like every other labour, is productive 
so far only as it augments the utility, and thereby the value of a 
product: beyond this point it is a purely unproductive exertion. 
To render the laws intricate purposely to give lawyers full busi- 
ness in expounding them, would be equally absurd, as to spread 
a disease that doctors may find practice. 

Immaterial products are the fruit of human industry, in which 
term we have comprised every kind of productive labour. It is 
not so easy to understand how they can at the same time be the 

*What, then, are we to think of those who assert in substance, if not in 
words, that such a formality or such a tax is productive of one benefit at 
least, namely, the maintenance of such or such an establishment of clerks 
and officers? 

t Traduction de Smith, note 20. 

17 



66 ON PRODtJCTION. book i. 

fruit of capital. Yet these products are for the most part the re- 
sult of some talent or other, which always implies previous study; 
and no study can take place without advances of capital. 

Before the advice of the physician can be given or taken, the 
physician or his relations must first have defrayed the charges 
of an education of many years' duration; he must have subsisted 
while a student ; professors must have been paid ; books pur- 
chased ; journeys perhaps have been performed ; all which im- 
plies the disbursement of a capital previously accumulated.* So 
likewise the lawyer's opinion, the musician's song, &c. are pro- 
ducts, that can never be raised without the concurrence of in- 
dustry and capital. Even the ability of the public functionary is 
an accumulated capital. It requires the same kind of outlay, for 
the education of a civil or military engineer, as for that of a phy- 
sician. Indeed, we may take it for granted, that the funds ex- 
pended in the training of a young man for the public service, are 
found by experience to be a fair investment of capital, and that 
labour of this descriptioa is well paid; for we find more appli- 
cants than offices in almost every branch of administration, even 
in countries where offices are unnecessarily multiplied. 

The industry productive of immaterial products will be found 
to go through exactly the same process, as, in the analysis made 
in the beginning of this work, we have shown to be followed by 
industry in general. This may be illustrated by an example. 
Before an ordinary song can be executed, the arts of the com- 
poser and the practical musician must have been regular and 
distinct callings ; and the best mode of acquiring skill in them 
must have been discovered: this is the department of the man 
of science, or theorist. The application of this mode and of this 
art, has been left to the composer and singer, who have calcu- 
lated, the one in composing his tune, the other in the execution 
of it, that it would afford a pleasure, to which the audience would 
attach some value or other. Finally, the execution is the con- 
cluding operation of industry.. 

There are, however, some immaterial products, with respect 
to which the two first operations are so extremely trifling, that 
one may almost account them as nothing. Of this description 
is the service of a menial domestic. The art of service is little 
or nothing, and the application of that art is made by the em- 
ployer; so that nothing is left to the servant, but the executive 

* I will not here anticipate the investigation of the profits of industry and 
capital, but confine myself to observe, en passant, that capital is thrown 
away upon the physician^ and his fees improperly limited, unless, besidesr 
the recompense of his actual labour and talent, (which latter is a natural 
agent gratuitously given to him,) they defray the interest of the capital ex- 
pended in his education, and not the common rate of interest, but calculated 
at the rate of an annuity. 



CHAP. xin. ON PRODUCTION. 67 

business of service, which is the last and lowest of industrious 
operations. 

It necessarily follows, that, in this class of industry, and some 
few others practised by the lowest ranks of society, that of the 
porter for instance, or of the prostitute, &c. &c.: the charge of 
training being little or nothing, the products may be looked upon 
not only as the fruits of very coarse and primitive industry, but 
hkewise as products, to the creation of which capital has contri- 
buted nothing; for I can not think the expense of these agents' 
subsistence from infancy, till the age of emancipation from pa- 
ternal care, can be considered as a capital, the interest of which 
is paid by the subsequent profits. I shall give my reasons for 
this opinion when I come to speak of wages.* 

The pleasures one enjoys at the price of any kind of personal 
exertion, are immaterial products, consumed at the instant of 
production by the very person that has created them. Of this 
description are the pleasures derived from arts studied solely for 
self-amusement. In learning music, a man devotes to that study 
some small capital, some time and personal labour; all which to- 
gether are the price paid for the pleasure of singing a new air or 
taking part in a concert. 

Gaming, dancing, and field-sports, are labours of the same 
kind. The amusement derived from them is instantly consumed 
by the persons who have performed them. When a man exe- 
cutes a painting, or makes any article of smith's or joiner's work 
for his amusement, he at the same time creates a durable product 
or value, and an immaterial product, viz. his personal amuse- 
ment."}" 

In speaking of capital, we have seen, that part of it is devoted 
to the production of material products, and part remains wholly 
unproductive. There is also a further part productive of utility 
or pleasure, which can, therefore, be reckoned as a portion nei- 
ther of the capital engaged in the production of material objects, 
nor of that absolutely inactive. Under this head may be com- 
prised dwelling-houses, furniture, and decorations, that are an 
addition to the mere pleasures of life. The utility they afford is 
an immaterial product. 

* The wages of the mere labourer are limited to the bare necessaries of 
life, without which his agency can not be continued and renewed ; there is 
no surplus for the interest on capital. But the subsistence of his children, 
until old enough to earn their own livelihood, is comprised in the necessa- 
ries of the labourer. 

t An indolent and inert people is always little addicted to amusements 
resulting from the exercise of personal faculties. Labour is attended with 
so much pain to them, as very few pleasures are intense enough to repay- 
The Turks think us mad to find pleasure in the violent motions of the dance ; 
without reflecting, that it causes to us infinitely less fiitigue than to them- 
selves. They prefer pleasures prepared by the fatigue of others. There is, 
perhaps, as much industry expended on pleasure in Turkey as with us ; but 
it ia exerted in general by slaves, who do not participate in the product- 



68 ON PRODUCTION. book i. 

.When a young couple sets up house-keeping for the first time, 
the plate they provide themselves with can not be considered as 
absolutely inactive capital, for it is in constant domestic use; nor 
can it be reckoned as capital engaged in the raising of material 
products; for it leads to the production of no one object capable 
of being reserved for future consumption; neither is it an object 
of annual consumption, for it may last, perhaps, for their joint 
lives, and be handed down to their children; but it is capital 
productive of utility and pleasure. Indeed, it is so much value 
accumulated, or, in other words, withdrawn from reproductive 
consumption; consequently, yielding neither profit nor interest, 
but productive of some degree of benefit or utility, which is gra- 
dually consumed and incapable of being realized, yet it is pos- 
sessed of real and positive value, since it is occasionally the ob- 
ject of purchase: as in the instance of the rent of a house or the 
hire of furniture, and the like. 

Although it be a sad mistake of personal interest to vest the 
smallest particle of capital in a manner wholly unproductive, it is 
by no means so to lay out, in a way productive of utility or 
amusement, so much as may be not disproportionate to the cir- 
cumstances of the individual. There is a regular gradation of 
the ratio of capital so vested by individuals respectively, from 
the rude furniture of the poor man's hovel, up to the costly or- 
naments and dazzling jewels of the wealthy. When a nation is 
rich, the poorest family in it possesses a capital of this kind, not 
indeed of any great amount, but still enough to satisfy moderate 
and limited desires. The prevalence of general wealth in a com- 
munity is more strongly indicated by meeting universally with 
some useful and agreeable household conveniences in the dwell- 
ings of the inferior ranks, than by the splendid palaces and costly 
magnificence of a few favourites of fortune, or by the casual dis- 
play of diamonds and finery, we sometimes see brought together 
in a large city, where the whole wealth of the place is often ex- 
hibited at one view, at a fete or a theatre of public resort; but 
which, after all, are a mere trifle, compared with the aggregate 
value of the household articles of a great people. 

The component items of a capital, producing bare utility or 
amusement, are liable to wear and tear, though in a very slight 
degree ; and if that wear and tear be not made good out of the 
savings of annual revenue, there is a gradual dissipation and re- 
duction of capital. 

This remark may appear trifling ; yet how many people think 
they are living upon their revenue, when they are at the same 
time partially consuming their capital! Suppose, for instance, a 
man is proprietor of the house he lives in; if the house be calcu- 
lated to last 100 years, and have cost 100,000 y»'. in the build- 
ing, it costs the proprietor or his heirs lOOO^r. per annum, ex- 
clusive of the interest upon the original cost, otherwise the whole 



CHAP. xm. ON PRODUCTION. 69 

capital will be extinguished, or nearly so, by the end of 100 
years. The same reasoning is applicable to every other iteni of 
capital devoted to the production of utility or pleasure; to a side- 
board, a jewel, every inrjaginable object, in short, that comes un- 
der the same denomination. 

And vice versa, when annual revenue, arising from what- 
ever source, is encroached upon for the purpose of enlarging the 
capital devoted to the production of useful or agreeable objects, 
there is an actual increase of capital and of fortune, though none 
of revenue. 

Capital of this class, like all other capital without exception, 
is formed by the partial accumulations of annual products. There 
is no other way of acquiring capital, but by personal accumula- 
tion, or by succession to accumulation of others. Wherefore, 
the reader is referred on this head to Chap. 11, where I have 
treated of the accumulation of capital. 

A public edifice, a bridge, a highway, are savings or accumu- 
lations of revenue, devoted to the formation of a capital, whose 
returns are an immaterial product consumed by the public at 
large. If the construction of the bridge or highway, added to 
the purchase of the ground it stands upon, have cost a million of 
francs, the use the public makes of it may be estimated to cost 
50,000 yV. per annum.* 

There are some immaterial products, towards which the land 
is a principal contributor. Such is the pleasure derived from a 
park or pleasure-garden. The pleasure is afforded by the con- 
tinual and daily agency of the natural object, and is consumed as 
fast as produced. A ground yielding pleasure must, therefore, 
not be confounded with ground lying waste or in fallow. Where- 
in again appears the analogy of land to capital, of which, as we 
have seen, some part is productive of immaterial products, and 
some part is altogether inactive. 

Gardens and pleasure-grounds have generally cost some ex- 
pense in embellishment; in which case, capital and land unite 
their agency to yield an immaterial product. 

Some pleasure-grounds yield likewise timber and pasturage: 
these are productive of both classes of products. The old-fa- 
shioned gardens in France yielded no material product; those of 
modern times are somewhat improved in this particular, and 

* If it entail a further charge of 1000 /r. for annual repairs and mainte- 
nance, the public consumption of pleasure or utility may be set down at 
51,000/r. per annum. This is the only way of taking the account, with a 
view to compare the advantage derived by the payers of public taxes, with 
the sacrifices imposed on them for the acquisition of such conveniences. In 
the case put above, the public will be a gainer, if the outlay of 51,000/r. have 
effected an annual saving in the charge of national production, or, what is 
the same thing, an annual increase of the national product, of still larger 
amount. In the contrary supposition, the national administration will have 
led the nation into a losing concern. 



70 ON PRODUCTION. book i. 

would be more so, if culinary herbs and fruit-trees were oftener 
introduced. Doubtless it would be harsh to find fault with a 
proprietor in easy circumstances, for appropriating part of his 
freehold to the mere purpose of amusement. The delightful mo- 
ments he there passes with his family around him, the wholesome 
exercise he takes, the spirits he inhales, are among the most va- 
luable and substantia! blessings of life. By all means then, let him 
lay out his ground as he likes, and give full scope to his taste, 
or even caprice; but if caprice can be directed to an useful end, 
if he can derive profit without abridging enjoyment, his garden 
will have additional merit, and present a two-foid source of de- 
light to the eye of the statesman and the philosopher. 

I have seen some few gardens possessed of this double facul- 
ty of production; whence, although the lime, horse-chestnut, 
and sycamore trees, and others of the ornamental kind, were by 
no means excluded, any more than the lawns and the parterres; 
yet at the same time the fruit-trees, decked in the bloom of ver- 
nal promise, or weighed down by the maturity of autumnal 
wealth, added a variety and richness of colouring to the other 
local beauties. The advantages of distance and position were 
attended to without violating the convenience of division and in- 
closure. The beds and borders, planted with vegetables, were 
not provokingly straight, regular, or uniform, but harmonized 
with the undulations of the surface, and of vegetation of larger 
growth; and the walks were so disposed as to serve both for 
pleasure and cultivation. Every thing was arranged with a view 
to ornament, even to the vine-trelliced well for filling the water- 
ing-pots. The whole, in short, was so ordered, as if designed 
to impress the conviction, that utility and beauty are by no means 
incompatible, and that pleasure may grow up by the side of wealth. 

A whole country may, in like manner, grow rich even upon 
its ornamental possessions. Were trees planted wherever they 
could thrive without injury to other products,* besides the acces- 
sion of beauty and salubrity, and the additional moisture attract- 
ed by the multiplication of timber-trees, the value of the timber 
alone would, in a country of much extent, amount to something 
considerable. 

There is this advantage, in the cultivation of timber-trees, that 
they require no human industry beyond the first planting, after 
which nature is the sole agent of their production. But it is not 
enough merel)? to plant, we must check the desire of cutting 
down, until the weak and slender stalk, gradually imbibing the 
juices of the earth and atmosphere, shall, without the hand of 

* In many countries, an exaggerated notion seems to prevail, of the dam- 
age done by timber-trees, to other products of the soil ; yet it should seem, 
that they rather enhance than diminish the revenue of the landholder ; for 
we find those countries most productive, that are the best clothed with tim- 
ber : witness Normandy, England, Belgium, and Lombardy. 



CHAP. XHi. ON PRODUCTION. 71 

cultivation, have acquired bulk and solidity, and spread its lofty 
foliage to the heavens.* The best that man can do for it is, to 
forget it for some years; and, even where it yields no annual 
product it will recompense his forbearance when arrived at matu- 
rity, by an ample supply of firing, and of timber for the carpen- 
ter, the joiner, and the wheel-wright. 

In all ages, the love of trees and their cultivation has been 
strongly recommended by the best writers. The historian of 
Cyrus records, among his chief titles to renown, the merit of 
having planted all Asia Minor. In the United States, upon the 
birth of a daughter, the cultivator plants a httle wood, to grow 
up with her, and to be her portion on the day of marriage. (1) 
Sully, whose views of policy were extremely enlightened, en- 
riched most of the provinces of France with the plantation be di- 
rected. I have seen several, to which public gratitude still 
affixes his name; and they remind me of the saying of Addison, 
who was wont to exclaim, whenever he saw a plantation, " A 
useful man has passed this way." 

As yet w^e have been taken up with the consideration of the 
agents essential to production; without whose agency mankind 
would have no other subsistence or enjoyment, than the scanty 
and limited supply that nature affords spontaneously. We first 
investigated the mode in which these agents, each in its respec- 
tive department, and all in concert, co-operate in the work of 
production, and have afterwards examined in detail the individual 
action of each, for the further elucidation of the subject. — We 
must now proceed to examine the intrinsic and accidental causes, 
which act upon production, and clog or facilitate the exertion of 
productive agents. 

* The leaves of trees absorb the carbonic-acid gas floating in the atmos- 
phere we breathe, and which is so injurious to respiration. When this gas 
is superabundant, it brings on asphyxia, and occasions death. On the con- 
trary, vegetation increases the proportion of oxygen, which is the gas most 
favourable to respiration and to health. Ceteris paribus, those towns are 
the healthiest, which have the most open spaces covered with trees. It 
would be well to plant all our spacious quays. 

(1) [The American cultivator might be said, with much greater sem- 
blance of truth, on the birth of a daughter, to cut down ' a little wood,' in- 
stead of planting one.] American Editor. 



72 ON PRODUCTION. book r, 

CHAPTER XIV. 

OP THE RIGHT OF PROPERTr. 

It is the province of speculative philosophy to trace the origin 
©f the right of property; of legislation to regulate its transfer; 
and of political science to devise the surest means of protecting 
that right. Political economy views the right of property solely 
as the most powerful of all encouragements to the multiplication 
of wealth, and is satisfied with its actual stability^ without in- 
quiring about its origin or its safeguards. In fact, the legal in- 
violability of property is obviously a mere mockery, where the 
sovereign power is unable to make the laws respected, where it 
either practises robbery itself,* or is impotent to repress it ift 
others ; or where possession is rendered {>erpetually insecure, by 
the intricacy of legislative enactments, and the subtleties of tech- 
nical nicety. Nor can property be said to exist, vi^here it is not 
matter of reality as well as of right. Then, and then only can 
the sources of production, land, capital, and industry, attain their 
utmost degree of fecundity. 

There are some truths so completely self-evident, that demon- 
stration is quite superfluous. This is one of that number. Who 
will attempt to deny, that the certainty of enjoying the fruits of 
one's land, capital and labour, is the most powerful inducement to 
render them productive? Or who is dull enough to doubt, that 
no one knows so well as the proprietor how to make the best use 
of his property? Yet how often in practice is that inviolability 
of property disregarded, which, in theory, is allowed by all to be 
so immensely advantageous 1 How often is it broken in upon 
for the most insignificant purposes; and its violation, that should 
naturally excite indignation, justified upon the most flimsy pre- 
texts? so few persons are there who have a lively sense of any 
but a direct injury, or, with the most lively feelings, have firm- 
ness enough to act up to their sentiments. There is no security 
of property, where a despotic authority can possess itself of the 
property of the subject against his consent. Neither is there 
such security, where the consent is merely nominal and delusive. 
In England, the taxes are imposed by the national representa- 
tion; if, then, the minister be in the possession of an absolute 
majority, whether by means of electioneering influence, or by the 

* The strength of an individual is so little, when opposed to that of the 
government he lives under, that the subject can have no security against 
the exactions and abuses of authority, except in those countries, where th© 
guardianship of the laws is entrusted to the all-searching vigilance of a free 
press, and their violation checked by an efficient national representation.. 



CHAP. XIV. ON PRODUCTION. 73 

overwhelming patronage foolishly placed at his disposal, taxation 
would no longer be in reality imposed by the national represen- 
tatives ; the body bearing that name would, in effect, be the re- 
presentatives of the minister; and the people of England would 
be forcibly subjected to the severest privations, to further pro- 
jiects that possibly might be every way injurious to them.* 

It is to be observed that the right of property is equally invad- 
ed, by obstructing the free employment of the means of produc- 
tion, as by violently depriving the proprietor of the product of his 
land, capital, or industry; for the right of property, as defined by 
jurists, is the right of use, or even abuse. Thus, landed pro- 
perty is violated by arbitrarily prescribing tillage or plantation; 
or by interdicting particular modes of cultivation; the property 
of the capitalist is violated, by prohibiting particular ways of era- 
ploying it ; for instance, by interdicting large purchases of corn, 
directing all bullion to be carried to the mint, forbidding the pro- 
prietor to build on his own soil, or prescribing the form and re- 
quisites of the building. It is a further violation of the capital- 
ist's property to prohibit any kind of industry, or to load it with 
duties amounting to prohibition, after he has once embarked his 
capital in that way. It is manifest, that a prohibition upon sugar 
would annihilate most of the capital of the sugar refiners, vested 
in furnaces, utensils, &c. Stcf 

The property a man has in his own industry, is violated, when- 
ever he is forbidden the free exercise of his faculties and talents, 
except insomuch as they would interfere with the rights of third 
parties. J A similar violation is committed when a man's labour 

* Adam Smith has asserted, that the security afforded to property by the 
laws of England, has more than counteracted the repeated faults and blun- 
ders of its government. It may be doubted, whether he would now adhere 
to that opinion. 

t It would be vain to say to him, why not employ your works in some other 
way ? Probably, neither the spot nor the works of a refinery could be other- 
wise employed without enormous loss. 

t The industrious faculties are, of all kinds of property, the least ques- 
tionable ; being derived directly either from nature, or from personal assi- 
duity. The property in them is of higher pretensions than that of the 
land, which may generally be traced up to an act of spoliation ; for it ia 
hardly possible to show an instance, in which its ownership has been legiti- 
mately transmitted from the first occupancy. It ranks higher than the 
right of the capitalist also ; for even taking it for granted, that this latter 
has been acquired without any spoliation whatever, and by the gradual ac- 
cumulations of ages, yet the succession to it could not have been establish- 
ed without the aid of legislation, which aid may have been granted on con- 
ditions. Yet, sacred as the property in the faculties of industry is, it is 
constantly infringed upon, not only in the flagrant abuse of personal slavery, 
but in many other points of more frequent occurrence. 

A government is guilty of an invasion upon it, when it appropriates to 
itself a particular branch of industry, the business of exchange and broker- 
age for example ; or when it sells the exclusive privilege of conducting it. 
It is still a greater violation to authorize a gendarme, commissary of police 
or judge, to arrest and detain individuals at discretion, on the plea of pub- 

18 



74 ON PRODUCTION. book i. 

is put in requisition for one purpose, though designed by himself 
for another; as when an artisan or trader is forced into the military 
life, whether permanently or merely for the occasion. 

I am well aware, that the importance of maintaining social 
order, whereon the security of property depends, takes prece- 
dence of property itself; for which very reason, nothing short of 
the necessity of defending that order from manifest danger can 
authorize these or similar violations of individual right. And this 
it is which impresses upon the proprietors the necessity of re- 
quiring, in the constitution of the body politic, some guarantee or 
other, that the public service shall never be made a mask to the 
passions and ambition of those in power. 

Thus taxation^ when not intended as an engine of national 
depression and misery ,^ must be proved indispensable to the 
existence of social order; every step it takes beyond these limits, 
is an actual spoliation ; for taxation, even where levied by nation- 
al consent, is a violation of property ; since no values can be lie- 
vied, but upon the produce of the land, capital, and industry of 
individuals. 

But there are some extremely rare cases, where interference 
between the owner and his property is even beneficial to pro- 
duction itself For example, in all countries that admit the de- 
testable right of slavery, a right standing in hostility to all others, 
it is found expedient to Hmit the master's power over his slave, (fl) 
Thus also, if a society stand in urgent need of timber for the 
shipwright or the carpenter, it must reconcile itself to some regu- 
lations respecting the felling of private woods ;* or the fear of 
losing the veins of mineral that intersect the soil, may sometimes 
oblige a government to work the mines itself It may be readily 
conceived, that, even if there were no restraints upon raining, 
want of skill, the impatience of avarice, or the insufficiency of 
capital, might induce a proprietor to exhaust the superficial, 
which are commonly the poorest lodes, and occasion the loss of 

lie safety or security to the constituted authorities ; thus depriving the indi- 
vidual of the fair and reasonable certainty of having his time and faculties at 
his own disposal, and of being able to complete what he may begin upon. 
What robber or despoiler could commit a more atrocious act of invasion 
upon the public security, certain as he is of being speedily put down, and 
counteracted by private as well as public opposition ? 

* Probably also,,Avere it not for maritime wars, originating, sometimes is 
puerile vanity, and sometimes in national errors of self-interest, commerce 
would be the best purveyor of timber for ship-building ; so that, in reality, 
the abuse of the interference of public authority, in respect to the growth 
of private timber, is only a consequence of a previous abuse of a more de- 
structive and less excusable character. 

(a) This is merely an instance of the necessity of counteracting ons 
poison by another. T. 



tiHip. XIV, ON PRODUCTION. 75 

those of superior depth and quality.(l) Sometinres a vein of 
mineral passes through the ground of many proprietors, but is 
accessible only in one spot. In this case, the obstinacy of a 
refractory proprietor must be disregarded, and the prosecution of 
the works be compulsory ; though, after all, I will not undertake 
to affirm, that it would not be more advisable on the whole to 
respect his rights, or that the possession of a few additional 
mines is not too dearly purchased by this infringement upon the 
inviolability of property. 

Lastly, public safety sometimes imperiously requires the sacri- 
fice of public property ; but that sacrifice is a violation, notwith- 
standing any indemnity given in such cases. For the right of 
property implies the free disposition <jf one's own ; and its sacri- 
fice, however fully indemnified, is a forced disposition. (a) 

When public authority is rwt itself a spoliator, it procures to 
the nation the greatest of all blessings, protection from spoliation 
by others. Without this protection of each individual by the 
united force of the whole community, it is impossible to conceive 
any considerable development of the productive powers of man, 
of land, and of capital; or even to conceive the existence of ca- 
pital at all; for it is nothing more than accumulated value, ope- 
rating under the safeguard of authority. This is the reason why 
no nation has ever arrived at any degree of opulence, that has 
not been subject to a regular government. Civilized nations 
are indebted to political organization for the innumerable and 
infinitely various productions, that satisfy their infinite wants, as 
well as for the fine arts and the opportunities of leisure that ac- 
cumulation affords, without which the faculties of the mind could 
never be cultivated, or man by their means attain the full dignity, 
whereof his nature is susceptible. 

The poor man, that can call nothing his own, is equally inte- 
rested with the rich in upholding tlie inviolability of propertyo 



(a) Property being a mere creature of society, is, in strict justice, liable 
to the conditions essential to the well-being- of society its creator. But be- 
yond all doubt, it is expedient to render it as inviolable and extensive as 
possible. Why? Because, 1. It is one of the rewards of industry; and 
there is a manifest expedience in enlarging- those stimulative rewards. 2« 
Its objects neither can nor will be turned to so much productive account, 
otherwise than by the perpetuation of the ownership. T. 



(1) [If no one knows so well as the proprietor, how to make the best use 
of his property, as our author has just remarked, what advantage can result 
to society from the interference, in any case, of public authority, with the 
rights of individuals in the business of production. Nothing but the absolute 
maintenance of the social order should ever be permitted for an instant, to 
violate the sacred right of private property. Quite as specious, though 
equally unsound reasons may be assigned for imposing restraints upon a, 
variety of other em|)loymeiit8 besides raining.] Ameeican Editoiu 



iB ON PRODUCTION. book i. 

His personal services would not be available, without the aid of 
accumulations previously made and protected. Every obstruc- 
tion to, or dissipation of these accumulations, is a material injury 
to his means of gaining a livelihood ; and the ruin and spoliation 
of the higher is surely followed by the misery and degradation of 
the lower classes. A confused notion of the advantages of this 
right of property has been equally conducive with the personal in- 
terest of the wealthy, to make all civilized communities pursue and 
punish every invasion of property as a crime. The study of poli- 
tical economy is admirably calculated to justify and confirm this 
act of legislation; inasmuch as it explains, why the happy effects, 
resulting from the right of property, are more striking in propor- 
tion as that right is well guarded by political institutions. 



CHAPTEIIXV. 

OF THE VENT OR DEMAND(a) FOR PRODUCTS. 

It is common to hear adventurers in the different channels of 
industry assert, that their difficulty lies not in the production, but 
in the disposal of commodities ; that produce would always be 
abundant, if there were but a ready demand, or vent. When 
the vent for their commodities is slow, difficult, and productive 
of little advantage, they pronounce money to be scarce; the 
grand object of their desire is, a consumption brisk enough to 
quicken sales and keep up prices. But ask them what peculiar 
causes and circumstances facilitate the demand for their products 
and you will soon perceive that most of them have extremely 
vague notions of these matters ; that their observation of facts is 
imperfect, and their explanation still more so ; that they treat 
doubtful points as matter of certainty, often pray for what is di- 
rectly opposite to their interests, and importunately sohcit from 
authority a protection of the most mischievous tendency. 

To enable us to form clear and correct practical notions, in 
regard to the vents for the products of industry, we must care- 
fully analyze the best established and most certain facts, and 
apply to them the inferences we have already deduced from a 
similar way of proceeding ; and thus perhaps we may arrive at 
new and important truths, that may serve to enlighten the views 
of the agents of industry, and to give confidence to the measures 
of governments anxious to afford them encouragement. 

A man, who applies his labour to the investing of objects 



(a) Debouches, vent, which must always imply demand. The latter terra 
is made use of as more familiar to the English reader. T. 



CHAP. XV. ON PRODUCTION. 77 

with value by the creation of utility of some sort, can not expect 
that the value to be appreciated and paid for, unless where 
other men have the means of purchasina; it. Now, of what do 
the.se means consist? Of other values, of other products, likewise 
the fruit of industry, capital, and land. Which leads us to a 
conclusion, that may at first sight appear paradoxical; viz: 
that it is production which opens a demand for products. 

Should a tradesman say, " 1 do not want other products for 
my woollens, 1 want money/' there could be little difficulty m 
convincing him, that his customers could not pay him in money, 
without having first procured it by the sale of some other com- 
modities of their own. "Yonder farmer," he may be told, "will 
'buy your woollens, if his crops be good, and will buy more or 
less according to their abundance or scantiness; he can buy 
none at all, if his crops fail altogether. Neither can you buy 
his wool nOr his corn yourself, unless you contrive to get woollens 
or some other article to buy withal. You say, you only want 
money ; I say, you want other commodities, and not money. 
For what, in point of fact, do you want the money ? Is it not 
for the purchase of raw materials or stock for your trade, or vic- 
tuals for your support?* Wherefore, it is products that you 
want, and not money. The silver coin you will have received on 
the sale of your own products, and given in the purchase of those 
of other people, will the next moment execute the same office 
between other contracting parties, and so from one to another to 
infinity ; just as a public vehicle successively transports objects 
one after another. If you can not find a ready sale for your com- 
modity, will you say, it is merely for want of a vehicle to trans- 
port it? For after all, money is but the agent of the transfer of 
values. Its whole utility has consisted in conveying to your 
hands the value of the commodities, which your customer has 
sold, for the purpose of buying again from you ; and the very 
next purchase you make, it will again convey to a third person 
the value of the products you may have sold to others. So that 
you will have bought, and every body must buy, the objects of 
want or desire, each with the value of his respective products 
transformed into money for the moment only. Otherwise, how 
could it be possible, that there should now be bought and sold in 
France five or six times as many commodities, as in the misera- 
ble reign of Charles VI? Is it not obvious, that five or six times 
as many commodities must have been produced, and that they 
must have served to purchase one or the other. 

Thus, to say that sales are dull, owing to the scarcity of mo- 
ney, is to mistake the means for the cause ; an error that proceeds 

* Even when money is obtained with a view to hoard or bury it, the 
ultimate object is always to employ it in a purchase of some kind. The heir 
■of the lucky finder uses it in that way, if the miser do not ; for money, as 
jnoney, has no other use than to buy with. 



78 ON PRODUCTION. book i. 

from the circumstances, that ahnost all produce is in the first 
instance exchanged for money, before it is ultimately converted 
into other produce : and the commodity, which recurs so repeat- 
edly in use, appears to vulgar apprehensions the most important 
of commodities, and the end and object of all transactions, 
whereas it is only the medium. Sales can not be said to be dull 
because money is scarce, but because other products are so. 
There is always money enough to conduct the circulation and 
mutual interchange of other values, when those values really 
exist. Should the increase of traffic require more money to faci- 
litate it, the want is easily supplied, and is a strong indication of 
prosperity — a proof that a great abundance of values has been 
created, which it is wished to exchange for other values. In such 
cases, merchants know well enough how to find substitutes for 
the product serving as ♦he medium of exchange or money :* and 
money its^elf soon pours in, for this reason, that all produce natu- 
rally gravitates to that place where it is most in demand. It is a 
good sign when the business is too great for the money ; just in 
the .-^anie way as it is a good sign when the goods are too plenti- 
ful for the warehouses. 

When a superabundant article can find no vent, the scarcity of 
money has so little to do wi(h the obstruction of its sale, that the 
sellers would gladly receive its value in goods for their own 
consumption at the current price of the day : they would not ask 
for money, or have any occasion for that product, since the only 
use they could make of it would be to convert it forthwith into ar- 
ticles of their own consumption. f 

This observation is applicable to all cases, where there is a 
supply of commodities or of services in the market. They will 
universally find the most extensive demand in those places, where 
the most values are produced; because in no other places are the 
sole means of purchase created, i. e. values. Money performs 
but a momentary function in this double exchange; and when the 
transaction is finally closed, it will always be found, that one kind 
of produce has been exchanged for another. 

It is worth while to remark, that a product is no sooner creat- 
ed, tlian it, from that instant, affords a market for other pro- 
ducts to the full extent of its own value. When the producer 
has put the finishing hand to his product, he is most anxious to 

* By bills at sight or after date, bank-notes, running-credits, write-offs, 
&c. as at London and Amsterdam. 

1 1 speak here of their aggregate consumption, whether unproductive 
and designed to satisfy the personal wants of themselves and their families, 
or expended in the sustenance of reproductive industry. The woollen or 
cotton niaiiufacturer operates a two-fold consumption of wool and cotton, 
1. For his personal wear. 2. For the supply of his manufacture; but, be 
the purpose of his consumption what it may, whether personal gratification 
or reproduction, he must needs buy what he consumes with what he pro- 
duces. 



CHAP. XV. ON PRODUCTION. 75 

sell it immediately, lest its value should vanish in his hands. 
Nor is he less anxious to dispose of the money he may get for it; 
for the value of money is also perishable. But the only way of 
getting rid of money is in the purchase of some product or other. 
Thus, the mere circumstance of the creation of one product im- 
mediately opens a vent for other products. 

For this reason, a good harvest is favourable, not only to the 
agriculturist, but likewise to the dealers in all commodities gene- 
rally. The greater the crop, the larger are the purchases of the 
growers. A bad harvest, on the contrary, hurts the sale of com- 
modities at large. And so it is also with the products of manu- 
facture and commerce. The success of one branch of commerce 
supplies more ample means of purchase, and consequently opens 
a vent for the products of all the other branches ; on the other 
hand, the stagnation of one channel of manufacture, or of com- 
merce is felt in all the rest. 

But it may be asked, if this be so, how does it happen, that 
there is at times so great a glut of commodities in the market, 
and so much difficulty in finding a vent for themi Why can 
not one of these superabundant commodities be exchanged for 
another'? I answer, that the glut of a particular commodity 
arises from its having outrun the total demand for it in one of two 
ways; either because it has been produced in excessive abundance, 
or because the produce of other commodities has fallen short. 

It is because the production of some commodities has de- 
clined, that other commodities are superabundant. To use a 
more hackneyed phrase, people have bought less, because they 
have made less profit ;* and they have made less profit for one 
of two causes ; either they have found difficulties in the employ- 
ment of their productive means, or these means have themselves 
been deficient. 

It is observable, moreover, that precisely at the same time 
that one commodity makes a loss, another commodity is making 
excessive profit. "j" And, since such profits must operate as a 
powerful stimulus to the cultivation of that particular kind of pro- 
duce, there must needs be some violent means, or some extraor- 
dinary cause, a political or natural convulsion, or the avarice or 
ignorance of authority, to perpetuate this scarcity on the one 
hand, and consequent glut on the other. No sooner is the cause 
of this political disease removed, than the means of production 

* Individual profits must, in all ranks of production, from the general' 
merchant to the common artisan, be derived from the participation in the 
values produced. The ratio of that participation will form the subject of 
Book II., infra. •■" 

+ The reader may easily apply these maxims to any time or country he 
is acquainted with. We have had a striding instance in France, during 
the years 1811, 1812, and 1813 ; when the high prices of colonial produce, 
of wheat, and other articles, went hand in hand with the low price of many 
others that could find no advantageous vent. 



80 ON PRODUCTION. book r. 

feel a natural impulse towards the vacant channels, the replenish- 
ment of which restores activity to all the others. One kind of 
production would seldom outstrip the rest, and its products be 
disproportionately cheapened, were production left entirely to 
itself.* 

Should a producer imagine, that many other classes, yielding 
no material products, are his customers and consumers equally 
with the classes that raise themselves a product of their own ; 
as, for example, public functionaries, physicians, lawyers, church- 
men, &c., and thence infer, that there is a class of demand other 
than that of the actual producers, he would but expose the shal- 
lowness and superficiality of his ideas. A priest goes to a shop 
to buy a gown or a surplice ; he takes the value, that is to make 
the purchase, in the form of money. Whence had he that money 1 
From some tax-gatherer(a) who has taken it from a tax-payer. 
But whence did this latter derive itl From tiie value he has him- 
self produced. This value, first produced by the tax-payer, and 
afterwards turned into money, and given to the priest for his sa- 
lary, has enabled him to make the purchase. The priest stands 

* These considerations have hitherto been almost wholly overlooked, 
though forming the basis of correct opinions on matters of commerce, and 
of its regulation hy the national authority. The right com-se where it has,, 
by good luck, been pursued, appears to have been selected by accident, or 
by, at most a confused idea of its propriety, without either self-conviction, 
or the ability to convince other people. 

Sismondi, who seems not to have very well luiderEtood the principles laid 
down in this and the three first cliapters of Book II. of this work, instances 
the immense quantity of manufactured produce with which England has of 
late inundated the markets of otlier nations, as a proof, that it is possible for 
industry to be too productive. {Nouv. Prin. liv. iv. c. 4.) But the glut 
thus occasioned proves nothing more than the feebleness of production in 
those countries, that have been thus glutted vfith English manufactures. 
Did Brazil produce wherewithal to purchase the English goods exported 
thither, those goods would not glut her market. Were England to admit 
the import of the products of the United States, she would find a better 
market for her own in those States. The English government, by the ex- 
orbitance of its taxation upon import aiid consumption, virtually interdicts 
to its subjects many kinds of importation, thus obliging the mercliant to 
offer to foreign countries a higher price for those articles, whose import is 
practicable, as sugar, coffee, gold, silver, &c., for the price of the precious- 
metals to them is enhanced by the low price of their commodities ; whiclx 
accounts for the ruinous returns of their commerce. 

I would not be understood to maintain in this chapter, that one product 
can not be raised in too great abmidance, in relation to all others ; but 
merely that nothing is. more favourable to tlie demand of one product, tJian 
the supply of another ; that the import of English manufacturers into Bra- 
zil would cease to be excessive and be rapidly absorbed, did Brazil produce- 
on her side returns sufliciently ample ; to which end it would be necessary, 
that tlie legislative bodies of either country should consent, the one to free 
production, the other to free importation. In Brazil, every thing is grasped 



{a) The clergy of France are now part of the national establishment, and 
receive salaries from the public Exchequer. T. 



CHAP. XV. ON PRODUCTION. 81 

in the place of the producer, who might himself have laid the 
value of his product on his own account, in the purchase, perhaps, 
not of a gown or surplice, but of some other more serviceable 
product. The consumption of the particular product, the gown 
or surplice, has but supplanted that of some other product. It is 
quite impossible that the purchase of one product can be effected, 
otherwise than by the value of another.* 

From this important truth may be deduced the following im- 
portant conclusions: — 

1. That, in every community the more numerous are the pro- 
ducers, and the more various their productions, the more prompt, 
numerous, and extensive are the vents for those productions ; and, 
by a natural consequence, the more profitable are they to the 
producers; for price rises with the demand. But this advantage 
is to be derived from real production alone, and not from a forced 
circulation of products; for a value once created is not augment- 
ed in its passage from one hand to another, nor by being seized 
and expended by the government, instead of by an individual. 
The man, that lives upon the productions of other people, origi- 
nates no demand for those productions ; he merely puts himself 
in the place of the producer, to the great injury of production, as 
we shall presently see. 

2. That each individual is interested in the general prosperity 
of all, and that the success of one branch of industry promotes 
that of all the others. In fact, whatever profession or line of 
business a man may devote himself to, he is the better paid and 
the more readily finds employment, in proportion as he sees 
others thriving equally around him. A man of talent, that scarce- 

by monopoly, and property is not exempt from the invasion of the govern- 
ment. In England, the heavy duties are a serious obstruction to the foreign 
commerce of the nation, inasmuch as they circumscribe the choice of re- 
turns. I happen myself to know of a most valuable and scientific collection 
of natural history, wrhich could not be imported from Brazil into England 
by reason of the exorbitant duties.(c() 

* The capitalist, in spending the interest upon his capital, spends his 
portion of the products raised by the co-operation of that capital. The 
general rules that regulate the ratio he receives will be investigated in 
Book II., infra. Should he ever spend the principal, still he consumes 
products only ; for capital consists of products, devoted indeed to reproduc- 
tive, but susceptible of unproductive consumption ; to which it is in fact 
consigned whenever it is wasted or dilapidated. 



(a) The views of Sismondi, in this particular, have been since adopted hy 
our own Malthus, and -those of our author h^ Ricardo. This difference of 
opinion has given rise to an interesting discussion between our author and 
Malthus, to whom he has recently addressed a Correspondence on this and 
other parts of the science. Were any thing wanting to confirm the argu- 
ments of this chapter, it would be supplied by a reference to his Lettre 1, 
d M. Malthus. Sismondi has vainly attempted to answer Ricardo, but has 
made no mention of his original antagonist. Vide Anncdes de Legislation, 
No. 1. art. 3. Geneve, 1820. T. 

19 



82 ON PRODUCTION. book i. 

ly vegetates in a retrograde state of society, would find a thou- 
sand ways of turning his faculties to account in a thriving com- 
munity that could afford to employ and reward his ability. A 
merchant established in a rich and populous town, sells to a much 
larger amount than one who sets up in a poor district, with a 
population sunk in indolence and apathy. What could an active 
manufacturer, or an intelligent merchant, do in a small deserted 
and semi-barbarous town in a remote corner of Poland or West- 
phalia? Though in no fear of a competitor, he could sell but 
little, because little was produced ; whilst at Paris, Amsterdam, 
or London, in spite of the competition of a hundred dealers in his 
own line, he might do business on the largest scale. The reason 
is obvious: he is surrounded with people who produce largely in 
an infinity of ways, and who make purchases, each with his re- 
spective products, that is to say, with the money arising from the 
sale of what he may have produced. 

This is the true source of the gains made by the towns' peo- 
ple out of the country people, and again by the latter out of the 
former; both of them have wherewith to buy more largely, the 
more ample they themselves produce. A city, standing in the 
centre of a rich surrounding country, feels no want of rich and 
numerous customers ; and, on the other side, the vicinity of an 
opulent city gives additional value to the produce of the country. 
The division of nations into agricultural, manufacturing, and 
commercial, is idle enough. For the success of a people in 
agriculture is a stimulus to its manufacturing and commercial 
prosperity; and the flourishing condition of its manufacture and 
commerce reflects a benefit upon its agriculture also.* 

The position of a nation, in respect of its neighbours, is ana- 
locrous to the relation of one of its provinces to the others, or of 
the country to the town; it has an interest in their prosperity, 
being sure to profit by their opulence. The government of the 
United States, therefore, acted most Avisely, in their attempt, 
about the year 1802, to civilize their savage neighbours, the 
Creek Indians. The design was to introduce habits of industry 

* A productive establishment on a large scale is sure to animate the in- 
dustry of the whole neighbourhood. " In Mexico," says Humboldt, " the 
best cultivated tract, and that which brings to the recollection of the tra- 
veller the most beautiful parts of French scenery, is the level country ex- 
tending from Salamanca as far as Silao, Guanaxuato, and Villa de Leon, and 
encircling the richest mines of the known world. Wherever the veins of 
precious metal have been discovered and worked, even in the most desert 
parts of the Cordilleras, and in the most barren and insulated spots, the 
working of the mines, instead of interrupting the business of superficial 
cultivation, has given it more than usual activity ..... The opening of a 
considerable vein is sure to be followed by the immediate erection of a 

town ; farming concerns are established in the vicinity ; and the spot 

so lately insulated in the midst of wild and desert mountains, is soon brought 
into contact with the tracts before in tillage." {Essai pol. sur la Nouv. Es- 
pagne.) 



CHAP. XV. ON PRODUCTION. 83 

amongst them, and make them producers, capable of carrying on 
a barter trade with the States of the Union; for there is nothing 
to be got by dealing with a people that have nothing to pay. It 
is useful and honourable to mankind; that one nation among so 
many should conduct itself uniformly upon liberal principles. 
The brilliant results of this enlightened policy will demonstrate, 
that the systems and theories really destructive and fallacious are 
the exclusive and jealous maxims acted upon by the old Euro- 
pean governments, and by them most impudently styled practical 
truths, for no other reason, as it would seem, than because they 
have the misfortune to put them in practice. The United States 
will have the honour of proving experimentally, that true policy 
goes hand in hand with moderation and humanity.* 

3. From this fruitful principle, we may draw this further con- 
clusion, that it is no injury to the internal or national industry 
and production to buy and import commodities from abroad; for 
nothing can be bought from strangers, except with native pro- 
ducts, which find a vent in this external traffic. Should it be ob- 
jected, that this foreign produce may have been bought with spe- 
cie, I answer, specie is not always a native product, but must 
have been bought itself with the products of native industry; so 
that, whether the foreign articles be paid for in specie or in home 
produce, the vent for national industry is the same in both cases.f 

4. The same principle leads to the conclusion, that the en- 
couragement of mere consumption is no benefit to commerce; 
for the difficulty lies in supplying the means, not in stimulating 
the desire of consumption; and we have seen, that production 
alone, furnishes those means. Thus it is the aim of good go- 

* It is only by the recent advances of political economy, that these most 
important truths have been made manifest, not to vulgar apprehension 
alone, but even to the most distinguished and enlightened observers. We 
read in Voltaire, that " such is the lot of humanity, that the patriotic desire 
for one's country's grandeur, is but a wish for the humiliation of one's 
neighbours ;..... that it is clearly impossible for one country to gain, ex- 
cept by the loss of another." (Diet. Phil. ArUPatrie.) By a continuation 
of the same false reasoning, he goes on to declare, that a thorough citizen 
of the w^orld can not vpish his country to be greater or less, richer or poor- 
er. It is true, that he would not desire her to extend the limits of her do- 
minion, because, in so doing, she might endanger her own well-being : but 
he will desire her progress in wealth, for her progressive prosperity pro- 
motes that of all other nations. 

t This effect has been sensibly experienced in Brazil of late years. The 
large imports of European commodities, which the freedom of navigation 
directed to the markets of Brazil, has been favourable to its native produc- 
tions and commerce, that Brazil products never found so good a sale. So 
there is an instance of a national benefit arising from importation. By the 
way, it might have perhaps been better for Brazil if the prices of her pro- 
ducts and the profits of her producers had risen more slowly and gradually; 
for exorbitant prices never lead to the establishment of a permanent com- 
mercial intercourse ; it is better to gain by the multiplication of one's own 
products than by their increased price. 



84 ON PRODUCTION. book i. 

vernment to stimulate production, of bad government to encou- 
rage consumption. 

For the same reason, that' the creation of a new product is the 
opening of a new vent for other products, the consumption or de- 
struction of a product is the stoppage of a vent for them. This 
is no evil, where the end of the products has been answered by 
its destruction, which end is the satisfying of some human want, 
or the creation of some new product designed for such a satis- 
faction. Indeed, if the nation be in a thriving condition, the 
gross national reproduction exceed^ the gross consumption. The 
consumed products have fulfilled their office, as it is natural and 
fitting they should ; the consumption, however, has opened no 
new vent, but just the reverse.* 

Having once arrived at the clear conviction, that the general 
demand for produce is brisk in proportion to the activity of pro- 
duction, we need not trouble ourselves much to inquire towards 
what channel of industry production may be most advantageous- 
ly directed. The products created give rise to various degrees 
of demand, according to the wants, the manners, the compara- 
tive capital, industry, and natural resources of each country; the 
article most in request, owing to the competition of buyers, yield 
the best interest of money to the capitalist, the largest profits to 
the adventurer, and the best wages to the labourer; and the 
agency of their respective services is naturally attracted by these 
advantages towards those particular channels. 

In a community, city, province, or nation, that produces abun- 
dantly, and adds every moment to the sum of its products, almost 
all the branches of commerce, manufacture, and generally of in- 
dustry, yield handsome profits, because the demand is great, and 
because there is always a large quantity of produce in the mar- 
ket, ready to bid for new productive services. And, vice versa, 
wherever, by reason of the blunders of the nation or its govern- 
ment, production is stationary, or does not keep pace with con- 
sumption, the demand gradually declines; the value of the pro- 
ducts is less than the, charges of their production; no productive 
exertion is properly rewarded ; profits and wages decrease; the 
employment of capital becomes less advantageous and more ha- 
zardous; it is consumed piecemeal, not through extravagance, 
but through necessity, and because the sources of profit are dried 
up. I The labouring classes experience a want of work ; fami- 



* If the barren consumption of a product be of itself adverse to reproduc- 
tion, and a diminution jiro tunto of the existing demand or vent for produce, 
how shall we designate that degree of insanity, which could induce a go- 
vernment deliberately to burn and destroy the imports of foreign produce, 
and thus to annihilate the sole advantage accruing from unproductive con- 
sumption, that is to say, the gratification of the wants of the consumer? 

t Consumption of this kind gives no encouragement to future production, 
but devours products already in existence. No additional demand can b« 



CHAP. XV. ON PRODUCTION. 85 

^ies before in tolerable circumstances, are more cramped and 
confined; and those before in difficulties, are left altogether des- 
titute. Depopulation, misery, and returning barbarism, occupy 
the place of abundance and happiness. 

Such are the concomitants of declining production, which are 
only to be remedied by frugality, intelligence, activity, and free- 
dom. 



CHAPTER XVI. 

OF THE BENEFITS RESULTING FROM THE BRISK CIRCULATION OF 
MONEY AND COMMODITIES. 

It is common to hear people descant upon the benefits of an 
active circulation; that is to say, of numerous and rapid sales. 
It is material to appreciate them correctly. 

The values engaged in actual production can not be realised 
and employed in production again, until arrived at the last stage 
of completion, and sold to the consumer. The sooner a product 
is finished off and sold, the sooner also can the portion of capital 
vested in it be applied to the business of fresh production. The 
capital being engaged a shorter time, there is less interest paya- 
ble to the capitalist; there is a saving in the charges of produc- 
tion; it is, therefore, an advantage, that the successive opera- 
tions performed in the course of production should be rapidly 
executed. 

By way of illustrating the effects of this activity of circulation, 
let us trace them in the instance of a piece of printed calico.* 

A Lisbon trader imports the cotton from Brazil. It is his in- 
terest, that his factors in America be expeditious in making pur- 
chases and remitting cargoes, and likewise, that he meet no de- 
lay in selling his cotton to a French merchant; because he there- 
by gets his returns the sooner, and can sooner recommence a 
new and equally lucrative operation. So far, it is Portugal that 
benefits by the increased activity of circulation ; the subsequent 
advantage is on the side of France. If the French merchant 
keep the Brazil cotton but a short time in his warehouse, before 

created, until there be new products raised ; there is only an exchange of 
one product for another. Neither can one branch of industry suffer with- 
out affecting the rest. 

* The term circulation, as well as many others employed in the science 
of political economy, is daily made use of at random, even by persons that 
pride themselves upon their precision. " The more equally circulation is 
diffused," says La Harpe, in one of his works, " the less indigence is to be 
found in the community." With great deference to the learned academi- 
cian, what possible meaning can the word circulation have in this passage ? 



S6 ON PRODUCTION. book i. 

he sells it to the cotton spinner, if the spinner after spinning sell 
it immediately to the weaver, if the weaver dispose of it forth- 
with to the Cfilico printer, and he in his turn sell it without much 
delay to the retail dealer, from whom it quickly passes to the 
consumer, this rapid circulation will have occupied for a shorter 
period the capital embarked by these respective producers ; less 
interest of capital will have been incurred; consequently, the 
prime cost of the article will be lower, and the capital will have 
been the sooner disengaged and applicable to fresh operations. 

All these different purchases and sales with many others that, 
for brevity's sake, I have not noticed, were indispensable before 
the Brazil cotton could be worn in the shape of printed calicoes. 
They are so many productive fashions given to this product; and 
the more rapidly they may have been given, the more benefit will 
have been derived from the production. But, if the same com- 
modity be merely sold several times over in a year in the same 
place without undergoing any fresh modification, this circulation 
would be a loss instead of a gain, and would increase, instead of 
reducing the prime cost to the consumer. A capital must be 
employed in buying and re-selling, and interest paid for its use, 
to say nothing of the probable wear and tear of the commodity. 

Thup, jabbing in merchandise necessarily causes a loss, either 
to the jobber, if the price be not raised by transaction, or to the 
consumer, if it be raised.* 

The activity of circulation is at the utmost pitch to which it 
can be carried with advantage, when the product passes into the 
hands of a new productive agent the instant it is fit to receive a 
new modification, and is ultimately handed over to the consumer, 
the instant it has received the last finish. All kind of activity 
and bustle not tending to this end, far from giving additional ac- 
tivit}'^ to circulation, is an impediment to the course of production, 
— an obstacle to circulation by all means to be avoided. 

With respect to the rapidity of production arising from the 
more skilful direction of industry, it is an increase of rapidity, 
not in circulation, but in productive energy. The advantage is 
analogous ; it abridges the occupation of capital. 

I have made no distinction between the circulation of goods 
and of money, because there really is none. While a sum of 
money lies idle in a merchant's coffers, it is an inactive portion 
of his capital, precisely of the same nature, as that part of his ca- 
pital which is lying in his warehouse in the shape of goods ready 
for sale. 

The best stimulus of useful circulation is, the natural wish of 
all classes, especially the producers themselves, to incur the 

* The trade of speculation, as we have before observed, {supra, Chap. 9.) 
js sometimes of use in withdrawing an article from circulation, when ita 
price is so low as to discourag-e the producer, and restoring it to circulation, 
when that price is unnaturally raised upon the consumer. 



CHAP. XVI. ON PRODUCTION. 87 

least possible amount of interest upon the capital embarked in 
their respective undertakings. Circulation is much more apt to 
be interrupted by the obstacles throw,n in its way, than by the 
want of proper encouragement. Its greatest obstructions are, 
wars, embargoes, oppressive duties, the dangers and difficulties 
of transport. It flags in times of alarm and uncertainty, when 
social order is threatened, and all undertakings are hazardous. 
It flags too, under the general dread of arbitrary exactions, when 
every one tries to conceal the extent of his ability. Finally, it 
flags in times of jobbing and speculation, when the sudden fluc- 
tuations caused by gambhng in produce make people look for a 
profit from every variation of mere relative price : goods are then 
held back in expectation of a rise, and money in the prospect of 
a fall; and, in the interim, both these capitals remain inactive 
and useless to production. Under such circumstances, there is 
no circulation, but of such produce as can not be kept without 
danger of deterioration; as fruits, vegetables, grain, and all arti- 
cles that spoil in the keeping. With regard to them, it is thought 
wiser to incur the loss of present sale, whatever it be, than to 
risk considerable or total loss. If the national money be dete- 
riorated, it becomes an object to get rid of it in any way, and ex- 
change it for commodities. This was one of the causes of the 
prodigious circulation that took place during the progressive de- 
preciation of the French assigndts. Every body was anxious to 
find some employment for a paper currency, whose value was 
hourly evaporating ; it was only taken to be re-invested immedi- 
ately, and one might have supposed it burnt the fingt^rs it passed 
through. On that occasion, men plunged into commerce, of 
which they were utterly ignorant; manufactures were establish- 
ed, houses repaired and furnished, no expense was spared even 
in pleasure; until at length all the value each individual possess- 
ed in assigndts was finally consumed, invested, or lost altogether. 



CHAPTER XVII. 

OP THE EFFECT OF GOVERNMENT REGULATIONS INTENDED TO IN- 
FLUENCE PRODUCTION. 

Strictly speaking, there is no act of government but what 
has some influence upon production. I shall confine myself in 
this chapter to such as are avowedly aimed at the exertion of 
such influence ; reserving the effects of the monetary system, of 
loans, and of taxes, to be treated of in distinct chapters. 

The object of governments, in their attempts to influence pro- 
duction, is, either to prescribe the raising of particular kinds of 



88 ON PRODUCTION. book i. 

produce, which they judge more advantageous than others, or to 
prescribe methods of production, which they imagine preferable 
to other methods. The effects of this two-fold attempt upon na- 
tional wealth will be investigated in the two first sections of this 
chapter: in the remaining two, I shall apply the same principles 
to the particular cases of privileged companies, and of the corn- 
trade, both on account of their vast importance, and for the pur- 
pose of further explaining and illustrating the principles. We 
shall see by the way, what reasons and circumstances will re- 
quire or justify a deviation from general principles. The grand 
mischiefs of authoritative interference proceed not from occasion- 
al exceptions to established maxims, but from false ideas of the 
nature of things, and the false maxims built upon them. It is 
then that mischief is done by wholesale, and evil pursued upon 
system: for it is well to beware, that no set of men are more bi- 
goted to system, than those who boast that they go upon none.* 



SECTION I. 

Effect ofRegulations prescribing the Nature of Products. 

The natural wants of society, and its circumstances for the time 
being, occasion a more or less lively demand for particular kinds 
of produce. Consequently, in these branches of production, 
productive services are somewhat better paid than in the rest ; 
that is to say, the profits upon land, capital, and labour, devoted 
to those branches of production, are somewhat larger. This ad- 
ditional profit naturally attracts producers, and thus the nature of 
the products is always regulated by the wants of society. We 
have seen, in a preceding chapter (xv.,) that these wants are 
more ample in proportion to the sum of gross production, and 
that society in the aggregate is a larger purchaser, in proportion 
to its means of purchasing. 

When authority throws itself in the way of this natural course 
of things, and says, the product you are about to create, that 
which yields the greatest profit, and is consequently the most in 
request, is by no means the most suitable to your circumstances ; 

* The greatest sticklers for adhering to practical notions, set out with the 
assertion of general principles : they begin, for instance, with saying, that 
no one can dispute the position, that one individual can gain only what an- 
other loses, and one nation profit only by the sacrifices of another. What 
is this but system? and one so unsound, that its abettors, instead of pos- 
sessing more practical knowledge than other people, show their utter igno- 
rance of many facts, the acquaintance with which is indispensable to the 
formation of a correct judgment. No man, who understands the real na- 
ture of production, and sees how new wealth may be, and is daily created, 
would attempt to advance so gross an absurdity. 



CHAP. XVII. ON PRODUCTION. 89 

you must undertake some other : it evidently directs part of the 
productive energies of the nation towards an object of less de- 
sire, at the expense of another object of more urgent desire. 

In France, about the year 1794, there were some persons 
persecuted, and even brought to the scaffold, for having convert- 
ed corn-land into pasturage. Yet, the moment these unhappy 
people found it more profitable to feed cattle than to grow corn, 
one might have been sure, that society stood more in need of 
cattle than of grain, and that greater value could be produced in 
one way than in the other. 

But, said the public authorities, the value produced is of less 
importance than the nature of the product, and we would rather 
have you raise 50/r. worth of grain than 100 of butcher's meat. 
In this they betrayed their ignorance of this simple truth, that the 
greatest product is always the best; and that an estate, which 
should produce in butcher's meat wherewith to purchase twice as 
much wheat as could have been raised upon it, produces, in re- 
ality, twice as much wheat as if it had been sowed with grain; 
since wheat to twice the amount is to be got for its produce. 
This way of getting wheat, they will tell you, does not increase 
its total quantity. True, unless it be introduced from abroad; 
but nevertheless, this article must at the time be relatively more 
plentiful than butcher's meat, because the produce of two acres 
of wheat is given for that of one acre of pasture.* And, if wheat 
be sufficiently scarce, and in sufficient request to make tillage 
more profitable than grazing, legislative interference is superflu- 
ous altogether; for self-interest will make the producer turn his 
attention to the former. 

The only question then is, which is the most likely to know 
what kind of cultivation yields the largest returns, the cultivator 
or the government ; and we may fairly take it for granted, that 
the cultivator, residing on the spot, making it the object of con- 
stant study and inquiry, and more interested in success than any 
body, is better informed in this respect than the government. 

Should it be insisted upon in argument, that the cultivator 
knows only the price-current of the day, and does not, like the 
government, provide for the future wants of the people, it may 
be answered, that one of the talents of a producer, and a talent 
his own interest obliges him assiduously to cultivate, is not the 
mere knowledge, but the fore-knowledge of human wants.| 

* At the disastrous period in question, there was no actual want of wheat ; 
the growers merely felt a disinclination to sell for paper-money. Wheat 
was sold for real value at a very reasonable rate ; and, though a hundred 
thousand acres of pasture land had been converted into arable, the disincli- 
nation to exchange wheat for a discredited paper-money would not have 
been a jot reduced. 

t Of course, in extraordinary cases, like that of a siege or a bloekade, 
ordinary rules of conduct must be disregarded. However irksome the ne- 
cessity, violent obstructions to the natural course of human affairs must b» 

20 



90 ON PRODUCTION. book i. 

An evil of the same description was occasioned, when, at an- 
other period the proprietors were compelled to cultivate beet-root, 
or woad, in lieu of grain : indeed, we may observe, en passant^ 
that it is always a bad speculation to attempt raising the products 
of the torrid, under the sun of the temperate latitudes. The sac- 
charine and colouring juices, raised on the European soils with 
all the forcing in the world, are very inferior in quantity and qua- 
lity to those that grow in profusion in other chmates ;* while, on 
the other hand, those soils yield abundance of grain and fruits 
too bulky and heavy to be imported from a distance. In con- 
demning our lands to the growth of products ill-suited to them, 
instead of those they are better calculated for, and, consequently, 
buying very dear what we might have cheap enough, if we would 
consent to receive them from places where they are produced 
with advantage, we are ourselves the victims of our own absurd- 
ity. It is the very acme of skill, to turn the powers of nature to 
best account, and the height of madness to contend against them; 
which is in fact wasting part of our strength, in destroying those 
powers she designed for our aid. 

Again, it is laid down as a maxim, that it is better to buy pro- 
duce dear, when the price remains in the country, than to get 
it cheap from foreign growers. On this point I must refer my 
readers to that analysis of production which we have just gone 
through. It will there be seen, that products are not to be obtained 
without some sacrifice, — without the consumption of substances 
and productive agency in some ratio or other, the value of which 
is in this way as completely lost to the community, as if it were 
to be exported. I 

I can hardly suppose any government will be bold enough to 
object, that it is indifferent about the profit, which might be de- 
rived from a more advantageous production, because it would 

removed by counteracting violence ; poison is in dangerous cases resorted 
to as a medicine ; but tliese remedies require extreme care and sliill in the 
application. 

*M. de Humboldt has remarked, that seven square leagues of land in a 
tropical climate, can furnish as much sugar as the utmost consumption of 
France, in its best days, has ever required. 

t In the seqiiel of this chapter, it will bo shown, that values exported give 
precisely the same encouragement to domestic industry, as, if they are con- 
sumed at home. In the instance just cited, suppose that wine had been 
grown instead of the sugar of beet-root, or the blue dye of woad, tlie do- 
mestic and agricultural industry of the nation would have been quite as 
much encouraged. And, since tlie product would have been more conge- 
nial to the climate, the wine produced from the same land would have pro- 
cured a larger quantity of colonial sugar and indigo through the channel of 
commerce, even if conducted by neutrals or enemies. The colonial sugar 
and indigo would have been equally the product of our own land, though 
first assuming the shape of wine ; only the same space of land would have 
produced them in superior quantity and quality. And the encouragement 
to domestic industry would be the same, or rather would be greater ; be- 
cause a product of superior value would reward more amply tlie agency of 
the Land, capital, and industry, engaged in the production. 



€HAP. xvii, ON PRODUCTION. 91 

tall to the lot of individuals. The worst governments, those 
which set up their own interest in the most direct opposition to 
that of their subjects, have by this time learnt, that the revenues 
of individuals are the regenerating source of public revenue ; 
and that, even under despotic and military sway, where taxation 
is mere organized spolitition, the subjects can pay only what they 
have themselves acquired. 

The maxims we have been applying to agriculture accord 
equally with manufacture. Sometimes a government entertains 
a notion, that the manufacture of a native raw material is better 
for the national industry, than the manufacture of a foreign raw 
material. It is in conformity to this notion, that we have seen 
instances of preference given to the woollen and linen above the 
cotton manufacture. By this conduct we contrive, as far as in 
us Hes, to hmit the bounty of nature, who pours forth in different 
climates a variety of materials adapted to our innumerable wants. 
Whenever human efforts succeed in attaching to these gifts of 
nature a value, that is to say, a degree of utility, whether by their 
import, or by any modification we may subject them to, an useful 
act is performed, and an item added to national wealth. The sa- 
crifice we make to foreigners in procuring the raw material is not 
a whit more to be regretted, than the sacrifice of advances and 
consumption, that must be made in every branch of production, 
before we can get a new product. Personal interest is, in all 
cases, the best judge of the extent of the sacrifice, and of the in- 
-demnity we may expect for it ; and, although this guide may 
sometimes mislead us, it is the safest in the long run, as well as 
the least costly.* 

But personal interest is no longer a safe criterion, if individual 
interests are not left to counteract and control each other. If 

* One is obliged every moment to turn round and combat objections, that 
never could have been started, if the science of politica-l economy had been 
more widely diffused. It will here, for instance, in all probability, be said, 
— granting that the sacrifice made in the purchase of the raw flax for manu- 
facture, and that made in the purchase of cotton, is to the manufacturer or 
merchant equal in the one case and the other, — still, in the one case, the 
amount of the sacrifice is expended and consumed in the nation itself, and 
conduces to the national advantage ; in the other, the whole advantage goes 
to the foreign grower. I answer, the advantage goes to the nation in either 
case ; for the foreign raw material, cotton, can not be purchased, except 
with a domestic product, which must be bought of the national grower be- 
fore the merchant can go to market; whether flax or any thing else, it must 
be some value of domestic creation. Why may he not buy with money ? 
MoneyTtself must have been originally purchased with some other product, 
which must have occupied domestic industry, as much as the growth of 
flax. Turn it which way you will, it comes to the same thing in the end, 
Wealth can only be acquired by the production of value, or lost by its con- 
sumption ; and, putting absolute robbery out of the question, the whole con- 
sumption of a nation must always be supplied from its internal resources, 
its land, capital, and industry, even that portion of it v/hich falls upon ex- 
ternal objects. 



92 ON PRODUCTION. book i. 

one individual, or one class, can call in the aid of authority to 
ward off the effects of competition, it acquires a privilege to the 
prejudice and at the cost of the whole community ; it can then 
make sure of profits not altogether due to the productive services 
rendered, but composed in part of an actual tax upon consumers 
for its private profit ; which tax it commonly shares with the au- 
thority, that thus unjustly lends its support. 

The legislative body has great difficulty in resisting the impor- 
tunate demands for this kind of privileges ; the applicants are 
the producers that are to benefit thereby, vv'ho can represent, 
with much plausibility, that their own gains are a gain to the 
industrious classes, and to the nation at large, their workmen 
and themselves being members of the industrious classes, and 
of the nation.* 

When the cotton manufacture was first introduced in France, 
all the merchants of Amiens, Rheims, Beauvais, &c. joined in 
loud remonstrances, and represented, that the industry of these 
towns was annihilated. Yet they do not appear less industrious 
or rich than they were fifty years ago ; while the opulence of 
Rouen and all Normandy has been wonderfully increased by the 
new fabric. 

The outcry was infinitely greater, when printed calicoes first 
came into fashion ; all the chambers of commerce were up in 
arms; meetings, debates, were every where held; memorials and 
deputations poured in from every quarter, and great sums were 
spent in the opposition. Rouen now stood forward to represent 
the misery about to assail her, and painted, in moving colours, 
" old men, women, and children, rendered destitute ; the best 
cultivated lands in the kingdom lying waste, and the whole of a 
rich and beautiful province depopulated.'' The city of Tours 
urged the lamentations of the deputies of the whole kingdom, 
and foretold "a commotion that would shake the frame of social 
order itself." Lyons could not view in silence a project " which 
filled all her manufactories with alarm." Never on so important 
an occasion had Paris presented itself at the foot of a throne, 
" watered with the tears of commerce." Amiens viewed the 
introduction of printed calicoes as the gulf, that must inevitably 
swallow up all the manufactures of the kingdom. The memorial 
of that city, drawn up at a joint meeting of the three corporations, 
and signed unanimously, ended in these terms : ' To conclude, 
it is enough for the eternal prohibition of the use of printed cali- 
coes, that the whole kingdom is chilled with horror at the news 
of their proposed toleration. Vox populi, vox dei.' 

* No one cries out against them, because very few know who it is that 
pays the gains of the monopolist. The real sufferers, the consumers them- 
selves, often feel the pressure, without being aware of the cause of it, and 
are the first to abuse the enlightened individuals, who ara really advocating- 
their interests. 



CHAP. XVII. ON PRODUCTION. 93 

Hear what Roland de la Platiere, who had the presentation 
of these remonstrances in quality of inspector-general of manu- 
factures, says on this subject, ' Is there a single individual at the 
present moment, who is mad enough to deny, that the fabric of 
printed calicoes employs an immense number of hands, what 
with the dressing of cotton, the spinning, weaving, bleaching, and 
printing? This article has improved the art of dyeing in a few 
years, more than all the other manufactures together have done 
in a century.' 

I must beg my readers to pause a moment, and reflect, what 
firmness and extensive information respecting the sources of pub- 
he prosperity were necessary to uphold an administration against 
so general a clamour, supported, amongst the principal agents of 
authority, by other motives, besides that of public utility. 

Though governments have too often presumed upon their 
power to benefit the general wealth, by prescribing to agricul- 
ture and manufacture the raising of particular products, they 
have interfered much more particularly in the concerns of com- 
merce, especially of external commerce. These bad consequences 
have resulted from a general system, distinguished by the name 
of the exclusive or commercial system, which attributes the profits 
of a nation to what is technically called a favourable balance of 
trade. Before we enter upon the investigation of the real effect 
of regulations, intended to secure to a nation this balance in its 
favour, it may be as well to form some notion what it really is, 
and what is its professed object ; which I shall attempt in the 
following 

DIGRESSION 

UPON WHAT IS CALLED THE BALANCE OF TRADE. 

The comparison a nation makes between the value of its ex- 
ports to, and that of its imports from foreign parts, forms what 
is called the balance of its trade. If it have exported more 
commodities than it has imported, it is taken for granted that 
the nation has to receive the difference in gold or silver; and the 
balance of trade is then said to be in its favour ; and when the 
case is reversed, the balance is said to be against it. 

The exclusive system proceeds upon these maxims : 1. That 
the commerce of a nation is advantageous, in proportion as its 
exports exceed its imports, and as there is a larger cash balance 
receivable in specie, or in the precious metals: 2. That, by 
means of duties, prohibitions, and bounties, the government can 
make that balance more in favour of, or less against, the nation. 

These two maxims must be analysed minutely ; in the first 
place, then, let us see what is the course of practice. 

When a merchant sends goods abroad, he causes them to be 



94 ON PRODUCTION. book i. 

there sold, and receives by the hands of his correspondents 
there, the price of his goods, in the money of the country. If he 
oxpects to make a profit upon the return cargo, he causes that 
price to be laid out in foreign produce, and remitted home to 
him. The operation is with little variation the same, when he 
pegins at the other end ; that is to say, by making purchases 
ribroad, which he pays for by remitting home produce thither. 
y?hese operations are not always executed on account of the 
feame merchant. It sometimes happens that the trader, who un- 
dertakes the outward, will not undertake the homeward adven- 
/ture. In that case he draws bills at date, or upon sight, upon 
his correspondents, by whom the goods have been sold : these 
bills he sells or negotiates, to somebody, who sends them to the 
place they are drawn upon, where they are made use of in the 
purchase of fresh goods, which the last mentioned person im- 
.ports himself.* 

In both cases, one value is exported, another value is import- 
! ed in return ; but we have not stopt to inquire, if any part of the 
value either exported or imported consisted of the precious me- 
tals. It may reasonably be assumed, that merchants, when left 
the free choice of what goods they will speculate in, will prefer 
those that offer the largest profit; that is to say, those which will 
bear the greatest value when they arrive at the place of destina- 
Ition. For example, a French merchant has consigned brandies 
Ito England, and has to receive from England for such his con- 
signment, 1000/. sterling: he naturally sits down to calculate the 
Idifference between what he will receive, if he import his 1000/. 
in the shape of the precious metals, and what he will receive, if 
he import that sum in the shape of cotton manufactures.! 

/ * What has been said of one trader, may be said equally of two — three, 
' — in short, of all the traders in the nation. As far as concerns the balance 
of commerce, tlie operations of the whole will resolve themselves into what 
I have just stated. Individual losses may occur on either side, from the fol- 
ly or knavery of some few of the traders eng'aged ; but we may take it for 
g-ranted, that they Avill, on the average, be inconsiderable, in compari- 
son with the total of business done; at all events, the losses on the one side 
will commonly balance those on the other. 

It is of very little importance to our purpose to inquire, by whom the 
charge of transport is borne : usually, the English trader pays the freight 
of the goods he hujs, and imports from France, and the French trader does 
the like upon Jiis purchases from England ; both of them look for the reim- 
bursement of tliis outlay to the value added to the articles by the circum- 
stance of transport. 

t It may he well here to point out a manifest blunder of some partisans 
of the exclusive system. They look upon nothing that a nation receives 
from abroad as a national gain, except what is received in the form of spe, 
cie; which is in effect to maintain, that a hatter, who sells a hat for 24 /r. 
gains the wliole 24 /r., because he receives it in specie. But this can not be; 
money, like other things, is itself a commodity, A French merchant 
consigns to England brandies to amount of 20,000 fr.: his commodity was 
equivalent in Franco to that sum in specie ; if it aell in England for lOOOZ. 



CHAP. XVII. ON PRODUCTION. 95 

If the merchant find it more advantageous to get his returns 
in goods than in specie, and if it be admitted, that he knows his 
own interest better than any body else, the sole point left for dis- 
cussion is, whether returns in specie, though less advantageous 
to the merchant, may not be better for the nation, than returns of 
any other article : whether, in short, it be desirable in a national 
point of view, that the precious metals should abound, in prefer- 
ence to any other commodity. 

What are the functions of the precious metals in the commu- 
nity 1 If shaped into trinkets or plate, they serve for personal 
ornament, for the splendour of our domestic establishments, or 
for a variety of domestic purposes ; they are converted into 

sterling, and that sum remitted in gold or silver be worth 24,000 fr. there 
is a gain of 4000 fr. only, although France has received 24,000 /r. in spe- 
cie. And, should the merchant lay out his lOOOZ. sterUng in cotton goods, 
and be able to sell them in France for 28,000 /r. there would then be a gain 
to the importer and to the nation of 8000 Jr., although no specie whatever 
had been brought into the country. In short, the gain is precisely the ex- 
cess of the value received above the value given for it, whatever be the form 
in which the import is made. 

It is curious enough, that the more lucrative external commerce is, the 
greater must be the excess of the import above the export ; and that the 
very thing, which the partisans of the exclusive system deprecate as a ca- 
lamity, is of all things to be desired. I will explain why. When there has 
been an export of 10, and an import in return of 11 millions, there is in th& 
nation a value of 1 million more than before the interchange. And, in 
spite of the specious statements of tlie balance of commerce, this must al- 
most always be so, otherwise the traders would gain nothing. In fact, tiie 
value of the export is estimated at its value before shipment, which is in- 
creased by the time it reaches the destination: with this augmented value 
the return is purchased, which also receives a like accession of value by the 
transport. The value of this import is estimated at the time of entry. Thus^ 
the result is the presence of a value equal to that exported, plus the gains 
outward and homeward. Wherefore, in a thriving country, the value of 
the total imports should always exceed that of the exports What then are 
we to think of the Report of the French Minister of the Interior of 1813^ 
who makes the total exports to have been 383 millions oi' francs, and the 
total imports inclusive of specie, but 350 millions ; a statement upon which 
he felicitates the nation, as the most favourable that had ever been present- 
ed. Whereas, this balance shows, on the contrary, what every body felt and 
knew, that the commerce of France was then making immense losses, in 
consequence of the blunders of her administration, and the total ignorance 
of the first principles of political economy. 

In a tract upon the kingdom of Navarre in Spain, {Annates des Voyages^ 
tom. i. p. 312.) I find it stated, that, on comparison of tlie value of the ex- 
ports with that of the imports of that kingdom, there is foimd to be an an- 
nual excess of the former above the latter of 600,000 fr. Upon which the au- 
thor very sagely observes, " that, if there be one truth more indisputable 
than another, it is this, that a nation which is growing rich can not be im- 
porting more than it is exporting ; for then its capital must diminish per- 
ceptibly. And, since Navarre is in a state of gradual improvement, as ap- 
pears from the advance of population and comfort, it is clear — ," that I 
know nothing about the matter, he might have added ;— " for I am citing 
an established fact to give the lie to an indisputable principle." We are 
every day witnessing contradictions of the same kind. 



96 ON PRODUCTION. book r. 

watch-cases, spoons, forks, dishes, coffee-pots ; or rolled out 
into leaves for the embellishment of picture-frames, book-bindin;yf, 
and the like ; in which case, they form part of that portion of the 
capital of the community, which yields no interest, but is devoted 
to the production of utility or pleasure. It is doubtless an advan- 
tage to the nation, that the material, whereof this portion of its 
capital consists, should be cheap and abundant. The enjoyment 
they afford in these various ways is then obtained at a lower rate, 
and is more widely diffused. There are many establishments on 
a moderate scale, which, but for the discovery of America, would 
have been unable to make the show of plate that is now seen 
upon their tables. But this advantage must not be over-rated ; 
there are other utilities of a much higher order. The window- 
glass, that keeps out the inclemency of the weather, is of much 
more importance to our comfort, than any species of plate what- 
soever; yet no one has ever thought of encouraging its import or 
production by special favour or exemptions. 

The other utihty of the precious metals is, to act as the ma- 
terial of money, that is to say, of that portion of the national ca- 
pital, which is employed in ficilitating the interchange of existing 
values between one individual and another. For this pur- 
pose, is it any advantage, that the material selected should be 
abundant and cheap? Is a nation, that is more amply provided 
with that material, richer than one which is more scantily sup- 
plied 1 

I must here take leave to anticipate a position, established in 
chap. 21 of this book, wherein the subject of money is consider- 
ed: viz. that the t9tal business of national exchange and circula- 
tion, requires a given quantity of the commodity, money, of some 
amount or other. There is in Franee a daily sale of so much 
wheat, cattle, fuel, property moveable and immoveable, which 
sale requires the daily intervention of a given value in the form 
of money, because every commodity is first converted into mo- 
ney, as a step towards its further conversion into other objects 
of desire. Now, whatever be the relative abundance or scarcity 
of the article money, since a given quantum is requisite for the 
business of circulation, the money must of course advance in 
value, as it declines in quantity, and decline in value as it ad- 
vances in quantity. Suppose the money of France to amount 
now to 3000 miUions of^ francs, and that by some event, no mat- 
ter what, it be reduced to 1500 millions; the 1500 millions will 
be quite as valuable as the 3000 millions. The demands of cir- 
culation require the agency of an actual value of 3000 millions ; 
that is to say, a value equivalent to 2000 millions of pounds of 
sugar, (taking sugar at 30 sous per lb.) or to 180 millions o^ hec- 
tolitres of wheat (taking wheat at 20 fr. the hectolitre,) What- 
ever be the weight or bulk of the material, whereof it is made, 
the total value of the national money will still remain at that 



CHAP. xvii. ON PRODUCTION, 9t 

point ; though, in the latter case, that material will be twice as 
valuable as in the former. An ounce of silver will buy eight in- 
stead of four lbs. of sugar, and so of all other commodities; and 
the 1500 millions of coin will be equivalent to the former 
3000. But the nation will be neither richer nor poorer than be- 
fore. A man, who goes to market with a less quantity of coin, 
will be able to buy with it the same quantity of commodities. 
A nation that has chosen gold for the material of its money, is 
equally rich with one that has made choice of silver, though the 
volume of its money be much less Should silver become fifteen 
times as scarce as at present, that is to say, as scarce as gold 
now is, an ounce of silver would perform the same functions, in 
the character of money, as an ounce of gold now does ; and we 
should be equally rich in money. Or, should it fall to a par with 
copper, we should not be a jot the richer in the article of money; 
we should merely be encumbered with a more bulky medium of 
circulation. 

On the score, then, of the other utilities of the precious metals, 
and on that score only their abundance makes a nation richer, 
because it extends the sphere of those utilities, and diffuses their 
use. In the character of money, that abundance no wise contri- 
butes to national enrichment ;* but the habits of the vulgar lead 
them to pronounce an individual rich, in proportion to the quan- 
tity of money he is possessed of; and this notion has been ex- 
tended to national wealth, which is made up of the aggregate of 
individuals' wealth. Wealth, however, as before observed, con- 
sists, not in the matter or substance, but in the value of that mat- 
ter or substance. A money of large, is v.'orth no more than a 
money of small volume ; neither is a money of small, of less va- 
lue, than one of large volume. Value, in the form of commodi- 

* It is a necessary inference from these positions, that a nation gains in 
wealth by the partial export of its specie, because the residue is of equal 
value to the total previous amount, and the nation receives an equivalent 
for the portion exported. How is this to be accounted' for ? By the pecu- 
liar property of money to exhibit its utility in the exercise, not of its physi- 
cal or material qualities, but those of its value alone. A less quantity of 
bread will less satisfy the cravings of hunger ; but a less quantity of money 
may possess an equal amount of utility ; for its value augments with the di- 
minution of its volume, and its value is the sole ground of its employment, 

Whence it is evident, that governments should shape their course in the 
opposite direction to that pursued at present, and encourage, instead of dis- 
couraging, the export of specie. And so they assuredly will, when they shall 
understand their business better : or rather, they will attempt neither the 
one nor the other ; for it is impossible, that any considerable portion of the 
national specie can leave the country, without raising the value of the resi- 
due. And, when it is raised, less of it is given in exchange for commodities, 
which are then low in price, so as to make it advantageous again to import 
specie and export commodities ; by which action and reaction the quantity 
of the precious metals is, in spite of all regulations, kept pretty nearly at 
the amount required by the wants of the nation. 

21 



9S ON PRODUCTION. book i. 

ties, is equivalent to value to the same amount in the form of 
money. 

It may be asked, why, then, is money so generally preferred 
to commodities, when the value on both sides is equal? This 
requires a little explanation. When I come to treat of money, it 
will be shown, that coined metal of equal value commands a pre- 
ference, because it ensures to the holder the attainment of the 
objects of desire by means of one exchange instead of two. He 
is not, like the holder of any other commodity, obliged, in the 
first instance, to exchange his own commodity, money, for the 
purpose of obtaining, by a second exchange, the object of his 
desire; one act of exchange suffices; and this it is, combined 
with the extreme facility of apportionment, afforded by graduated 
denominations of the coin, which renders it so useful in exchanges 
of value. Every individual, who has an exchange to make, be- 
comes a consumer of th'e commodity, money ; that is to say, 
every individual in the community; which accounts for the uni- 
versal preference of money to commodities at large, where the 
value is equal. 

But this superiority of money, in the interchange between in- 
dividuals, does not extend to that between nation and nation. In 
the latter, money, and, a fortiori, bullion, lose all the advantage 
of their peculiar character as money, and are dealt with as mere 
commodities. The merchant, who has remittances to make from 
abroad, looks at nothing but the gain to be made on those remit- 
tances, and treats the precious metals as a commodity he can 
dispose of with more or less benefit. In his eyes, an exchange 
more or less is no object; for it is his business to negotiate ex- 
changes, so as to get a profit upon them. An ordinary person 
might prefer to receive money instead of goods, because it is an 
article, whose value he is better acquainted with : but a merchant, 
who is apprised of the prices current in most of the markets of 
the world, knows how to appreciate the value he receives in re- 
turn, whatever shape it may appear under. 

An individual may be under the necessity of liquidating, for 
the purpose of giving a new direction to his capital, or of parti- 
tion, or the like. A nation is never obliged to do so. This li- 
quidation is effected with the circulating money of the nation, 
which it occupies only for the time: the same money going al- 
most immediately to operate another act of liquidation or of ex- 
change. 

We have seen above (Chap. 15.) that the abundance of specie 
is not even necessary for the national facilitation of exchanges 
and sales; for that buyers really buy with products, — each with 
his respective portion of the products he has concurred in cre- 
ating: that with this he buys money, which serves but to buy 
some further product; and that, in this operation, money affords 



CHAP. XVII. ON PRODUCTION. 99 

but a temporary convenience ; like the vehicles employed to con- 
vey to market the produce of a farm, and to bring back the arti- 
cles that have been purchased with the produce. Whatever 
amount of money may have been employed in the purchase or 
liquidation, it has passed for as much as it was taken for: and, 
at the close of the transaction, the individual is neither richer 
nor poorer. The loss or profit arises out of the nature of the 
transaction itself, and has no reference to the medium employed 
in the course of it. 

In no one way do the causes, that influeuce individual prefer- 
ence of money to commodities, operate upon international com- 
merce. When the nation has a smaller stock than its necessi- 
ties require, its value within the nation is raised, and foreign and 
native merchants are equally interested in the importation of 
more: when it is redundant, its relative value to commodities at 
lai-ge is reduced, and it becomes advantageous to export to that 
spot, where its command of commodities may be greater than at 
home. To retain it by compulsory measures, is to force indivi- 
duals to keep what is a burthen to them.* 

And here I might, perhaps, now dismiss the subject of the ba- 
lance of trade : but such is the prevailing ignorance on this topic, 
and so novel are the views I have been taking, even to persons 
of the better class, to writers and statesmen of the purest inten- 
tions and well informed on other points, that it may be worth 
while to put the reader on his guard against some fallacies, which 
are often set up in opposition to liberal principles, and are unfor- 
tunately the ground-work of the polity of most of the European 
States. I shall uniformly reduce the objections to the simplest 
terms possible, that their weight may be the more easily esti- 
mated. 

It is said, that, by increasing the currency through the means 
of a favourable balance of trade, the total capital of a nation is 
augmented; and, on the contrary, by diminishing it, that capital 
is reduced. But it must be always kept in mind, that capital 
consists, not of so much silver or gold, but of the values devoted 
to reproductive consumption, which values necessarily assume 

* No one but an entire stranger to these matters would here be inclined 
to object, that money can never be burthensome, and is always disposed of 
easily enough. So it may be, indeed, by such as are content to throw its 
value away altogether, or at least, to make a disadvantageous exchange. A 
confectioner may give av/ay his sugar-plums, or eat them himself; but in 
that case, he loses the value of them. It should be observed, that the abun- 
dance of specie is compatible with national misery ; for the money, that 
goes to buy bread, must have been bought itself with other products. And, 
when production has to contend with adverse circumstances, individuals 
are in great distress for money, not because that article is scarce, which 
oftentimes it is not, but because the creation of the products, wherewith it 
is procurable, can not be effected with advantage. 



100 ON PRODUCTION. book i. 

an infinite variety of successive forms. When it is intended to 
vest a given capital in any concern, or to place it out at interest,' 
the first step is undoubtedly to realise to that amount, by con- 
verting into ready money the different values one has at com- 
mand. The value of the capital, thus assuming the transient 
form of money, is quickly transmuted by one exchange after an- 
other into buildings, works, and perishable substances requisite 
for the projected adventure. — The ready money employed for 
the occasion passes again into other hands, for the purpose of 
facilitating fresh exchanges, as soon as it has accomplished its 
momentary duty; in like manner as do many other substances, 
the shape of which this capital successively assumes. So that 
the value of capital is neither lost nor impaired by parting with its 
value, whatever material shape it happens to be under, provided 
that we part with it in a way that ensures its renovation. 

Suppose a French dealer in foreign commodities to consign to 
a foreign country a capital of 100,000 /r. in specie for the pur- 
chase of cotton; when his cotton arrives, he possesses 100,000 
fr. value in cotton instead of specie, putting his profit out of the 
question for the moment. Has any body lost this amount of 
specie? Certainly not: the adventurer has come honestly by it. 
A cotton manufacturer gives cash for the cargo ; is he the loser 
of the price? No, surely: on the contrary, the article in his 
hands will increase to twice its value, so as to leave him a profit, 
after repaying all his advances. — If no individual capitalist has 
lost the 100,000/r. exported, how can the nation have lost them? 
The loss will fall on the consumer, they will tell you : in fact, all 
the cotton goods bought and consumed will be so much positive 
loss; but the same consumers might have consumed linens or 
woollens of exactly the same value without a centime of the 
100,000/r. being sent out of the country, and yet there would 
equally be a loss or consumption to that amount of value. The 
loss of value we are now speaking of is not occasioned by the 
export, but by the consumption, which might have taken place 
without any export whatever. I may, therefore, say, with strict 
attention to truth, that the export of the specie has caused no loss 
at all to the nation.* 

* A merchant's ledger for two successive years may show him richer at 
the end of the second, than at the end of the first, although possessed of a 
smaller amount of specie. Suppose the first year's amount to stand 
thus : — 

Francs. 
Ground and buildings ..... 40,000 

Machinery and moveables - - ... 20,00ft 

Stock in hand 15,000 

Balance of good credits 5,000 

Cash - - - . - . . - . 20,000 

Total 100,000 ■ 



CHAP. xvii. ON PRODUCTION. 101 

It has beentirged, with much confidence, that, had the export 
of 100,000 y}\ never been made, France would remain in pos- 
session of that additional value; in fact, that the nation has lost 
the amount twice over; first, by the act of export; secondly, by 
that of consumption: whereas, the consumption of an indigenous 
product would have entailed a single-loss only. But I answer as 
before, that the export of specie has occasioned no loss; that it 
was balanced by equivalent value imported ; and that it is so 
certain, that nothing has been lost, than the 100,000 /r. worth of 
imported commodities, that 1 def} any one to point any oiher 
losers than the consumers of those commodities. If there have 
been no loser, it is clear there can have been no loss. 

Would you put a stop to the emigration of capitaH It is not 
to be prevented by keeping specie in the country. A man re- 
solved to transfer his capital elsewhere can do it just as effectual- 
ly by the consignment of goods, whose export is permitted.* 
So much the better we may be told; for our manufacturers will 
benefit by the exports. True; but their value exists no longer 
in the nation, since they bring back no return wherewith to make 
new purchases; there has been a transfer of so much capital 
from amongst you, to give activity, not to your own, but to some 
other nation's industry. This is a real ground of apprehension. 
Capital naturally flows to those places, that hold out security 
and lucrative employment, and gradually retires from countries 
offering no such advantages : but it may easily enough retire, 
without being ever converted into specie. 

If the export of specie causes no diminution of national capital, 
provided it be followed by a corresponding return, on the other 
hand, its import brings no accession of capital. For, in reality, 
before specie can be imported, it must have been purchased by 
an equivalent value exported for that purpose. 

On this point it has been alleged, that, by sending abroad 

And the second year's thus : — 

Ground and buildings 40,000 

Machinery and moveables - . . . . 25,000 

Stock in hand 30,000 

Balance of good credits - - . . . 10,000 

Cash 5,000 



Total 110,000 
Exhibiting an increase of 10,000 /r., although his cash be reduced to one 

quarter of the former amount. 

A similar account, differing only in the ratios of the different items, 

might be made out for the whole of the individuals in the community, who 

would then be evidently richer, though possessed of much less specie or 

cash. 

* The transfer of capital by bills on foreign counties,, comes precisely to 

the same thing. It is a mere substitute in place of the individual making 

the export of commodities, who transfers his right to receive their proceeds,, 

the value of which remains abroad. 



102 ON PRODUCTION. . book u 

goods instead of specie, a demand is created for goods, and the 
producers enabled to make a profit upon their production. I 
answer, that, even when specie is sent abroad, that specie must 
have been first obtained by the export of some indigenous pro- 
duct; for, we may rest assured, that the foreign owner of it did 
not give it to the French importer for nothing; and France had 
nothing to offer in the first instance but her domestic products. 
If the supply of the precious metals in the country be more than 
sufficient for the wants of the country, it is a fitter object of ex- 
port than another commodity; and, if more of the specie be ex- 
ported than the excess of the supply above the demand for the 
purposes of circulation, we may calculate with certainty, that, 
since the value of specie must have been necessarily raised by 
the exportation, other specie will be imported to replace what has 
been withdrawn; for the purchase of which last, home products 
must have been sent abroad, which will have yielded a profit to 
the home producers In a word, every value sent out of France, 
for the purchase of foreign returns for the French market, may 
be resolved into a product of domestic industry, given either first 
or last, for France has nothing else to procure them with. 

Again, it has been argued, that it is better to export consuma- 
ble articles, as for instance, manufactures, and to keep at home 
those products not liable to consumption, or, at least, not to 
quick consumption, such as specie. Yet objects of quick con- 
sumption, if more in demand, are more profitable to keep than 
objects of slower consumption. It would often be doing a pro- 
ducer a very poor service, to make him substitute a quantity of 
commodities of slow consumption for an equal portion of his ca- 
pital of more rapid consumption. If an ironmaster were to con- 
tract for the delivery to him of a quantity of coal at a day cer- 
tain, and when the day came the coal could not be procurable, 
and he should be offered the value in money in its stead, it would 
be somewhat difficult to convince him of the service done him 
by the delivery of money; which is an object of much slower 
consumption than the coal he contracted for. Should a dyer 
send an order for dyeing woods from abroad, it would be a posi- 
tive injury to send him gold, on the plea, that, with equal value, 
it has the advantage of greater durability. He had no occasion 
for a durable article whatever; what he wanted was a substance, 
which, though decomposed in his vats, would quickly re-appear 
in the colours of his stuffs.* 

* In Book III., which treats of consumption, it will be seen, that the 
slower kinds of unproductive consumption are preferable to the more rapid 
ones. But, in the reproductive bi'anch, the more rapid are the better; be- 
cause, the more quickly the reproduction is effected, the less charge of in- 
terest is incurred, and the oftener the same capital can repeat its produc- 
tive agency. The rapidity of consumption, moreover, does not affect ex- 
ternal products in particular; its disadvantages ara equal, whether the 
product be of home or foreign growth. 



CHAP. XVII. ON PRODUCTION. 103 

If it were no advantap;e to import any but the most durable 
items of productive capital, there are other very durable objects, 
such as stone or iron, that ought to share in our partiality with 
silver and gold. But the point of real importance is, the durabi- 
lity, not of any particular substance, but of the value of capital. 
Now the value of capital is perpetuated, notwithstanding the re- 
peated change of the material -shape in which it is vested. Nay, 
it can not yield either interest or profit, unless that shape be 
continually varied. To confine it to the single shape of money 
would be to condemn it to remain unproductive. 

But I will go a step further, and, having shown that there is 
no advantage in importing gold and silver more than any other 
article of merchandise, I will assert, that, supposing it were de- 
sirable to have the balance of trade always in our favour, yet it 
is morally impossible it should be so. 

Gold and silver are like all the other substances that, united, 
compose national wealth; they are useful to the community no 
longer than while they do not exceed the national demand for 
them. Any such excess must make the sellers more numerous 
than the bidders; consequently, must depress the price in pro- 
portion, and thus create a powerful inducement to buy in the 
home market, in the expectation of making a profit upon the ex- 
port. This may be illustrated by an example. 

Suppose for a moment the internal traffic and national wealth 
of a given country to be such, as to require the constant employ 
of a thousand carriages of different kinds. Suppose too, that, 
by some peculiar system of commerce, we should succeed in 
getting more carriages annually imported, than were annually 
destroyed by wear and tear ; so that, at the year's end, there 
should be 1500 instead of 1000; is it not obvious, that there 
would be in that case 500 lying by in the repositories quite useless, 
and that the owners of them, rather than suffer their value to lie 
dormant, would undersell each other, and even smuggle them 
abroad if it were practicable, in the hope of turning them to bet- 
ter account"? In vain would the government conclude commer- 
cial treaties for the encouragement of their import: in vain would 
it expend its efforts in stimulating the export of other commodi- 
ties, for the purpose of getting returns in the shape of carriages; 
the more the public authorities favoured the import, the more 
anxious would individuals be to export. 

As it is with carriages, so is it with specie likewise. The de- 
mand is limited : it can form but a part of the aggregate wealth 
of the nation. That wealth can not possibly consist entirely of 
specie, for other things are requisite besides specie. The ex- 
tent of the demand for that peculiar article is proportionate to 
the general wealth ; in the same manner, as a greater number of 
carriages is wanted in a rich than in a poor country. Whatever 
brilliant or solid qualities the precious metals may possess, their 



104 ON PRODUCTION. book i. 

value dopKiuls upon the use made of them, and that use is limit- 
ed. Like carriages, they have a value peculiar to them; a value 
that ditriinishes in proportion to the increase of their relative 
plenty, in comparison with the objects of exchange, and increases 
in proportion to their relative scarcity. 

One is told, that every thing may be procured with gold or 
silver. True; but upon what terms? The terms are less ad- 
vantageous, when these metals are forcibly multiplied beyond 
the demand; hence their strong tendency to emigration under 
such circumstances. The export of silver from Spain was pro- 
hibited; yet Spain supplied all Europe vvilh it. In 1S12, the 
paper money of England having rendered superfluous all the gold 
money of that country, and made that metal too abundant for its 
other and remaining uses, its relative value fell, and her guineas 
emigrated to France, in spite of the ease with which the coasts 
of an island may be guarded, and of the denunciation of capital 
punishment against the exporters. 

To what good purpose, then, do governments labour to turn 
the balance of commerce in favour of their respective nations? 
To none whatever; unless, perhaps, to exhibit the show of finan- 
cial advantages, unsupported by fact or experience.* — How can 
maxims so clear, so agreeable to plain common sense, and to 
facts attested by all who have made commerce their study, have 
yet been rejected in practice by all the ruling powers of Europe,f 
nay, even have been attacked by a number of writers, that have 
evinced both genius and information on other subjects? To 
speak the truth, it is because the first principles of political eco- 
nomy are as yet but little known; because ingenious systems 

* The returns of British commerce from the commencement of the 18th 
century down to the establishment of the existing- paper money of that na- 
tion, show a regular annual excess, more or less, received by Great Britain 
in the shape of specie, amounting- altogether to the enormous total of 347 
millions sterling (more than 6000 millions of francs.) If to this be added 
the specie already in Great Britain at the outset, England ought to have 
possessed a circulating medium of very near 400 millions sterling. How 
happens it then, that the most exaggerated ministerial calculations have 
never given a larger total of specie than 47 millions, even at the period of 
its greatest abundance ? Vide supra. Chap. 3. 

+ All of them have acted under the conviction, 1. That the precious me- 
tals are the only desirable kind of wealth, whereas they perform but a se- 
condary part in its production : 2. That they have it in their power to cause 
their regular influx b}^ compulsory measures. The example of England 
( Vide note preceding,) w'll show the little success of the experiment. The 
pre-eminent wealth of tl at nation, then, is derived from some other cause 
than the favourable balance, of her commerce. But what other cause ? 
Why, fi-om the immensity of her production. But to what does she owe 
that immensity ? To the frugality exerted in the accumulation of indivi- 
dual capital; to the national turn for industry and practical application; to 
the security of person and projjerty, the facility of internal circulation, and 
freedom of individual agency, which, limited and fettered as it is, is yet, ou 
the whole, superior to that of the other European states. 



CHAP. XVII. ON PRODUCTION. 105 

and reasonings have been built upon hollow foundations, and ta- 
ken advantage of, on the one hand, by interested rulers, who era- 
ploy prohibition as a weapon of offence or an instrument of re- 
venue; and, on the other, by the personal avarice of merchants 
and manufacturers, who have a private interest in exclusive mea- 
sures, and take but little pains to inquire, vv'hether their profits 
arise from actual production, or from a simultaneous loss thrown 
upon other classes of the community. 

A determination to maintain a favourable balance of trade, that 
is to say, to export goods and receive returns of specie, is, in 
fact, a determination to have no foreign trade at all; for the na- 
tion, with whom the trade is to be carried on, can only give in 
exchange what it has to give. If one party will receive nothing 
but the precious metals, the other party may come to a similar 
resolution ; and, when both parties require the same commodity, 
there is no possibility of any exchange. Were it practicable to 
monopolize the precious metals, there are few nations in the 
world that would not be cut off from all hope of mutual commer- 
cial relations. If one country afford to another what the latter 
wants in exchange, what more would she have 1 or in what re- 
spect would gold be preferable? for what else can it be wanted, 
than as the means of subsequently purchasing the objects of de- 
sire 1 

The day will come, sooner or later, v^hen people will wonder 
at the necessity of taking all this trouble to expose the folly of a 
system, so childish and absurd, and yet so often enforced at the 
point of the bayonet. (1) 

END OP THE DIGRESSION UPON THE BALANCE OF TRADE. 



(1) " To the English reader," said Mr. Trinsep in a note to this section, 
" a great part of this elaborate digression will appear superfluous ; so rapid 
has been the progress of political economy, and so wide the diffusion of its 
principles." But Mr. Prinsep, then, in 1821, supposed, "that however 
much the continuance of the restrictive system was reprobated by all think- 
ing men, the administration was not capable of emancipating itself from 
the trammels of practical habits and opinions in which it had been train- 
ed." In this he has been mistaken; for by no set of men have the " impo- 
licy and injustice" of the restrictive system been more clearly pointed out, 
and measures taken to effect its entire repeal, than by Messrs. Huskisson, 
Canning, Robinson, and Wallace, the most prominent members of the Bri- 
tish government. 

" They have already done a great deal," says a writer in a late number 
of the Edinburgh Review, " to relieve the commerce and industry of the 
country from the shackles imposed in a less enlightened age ; and, notwith- 
standing the outcry and clamour, that a small faction, opposed to every 
species of improvement, and attached to every thing that is antiquated and 
vicious, has raised against them, they may be assured that their late mea- 
sures are cordially approved by the vast majority of the middle classes. Of 
Mr. Huskisson in particular, against whom every species of ribald abuse 

22 



106 ON PRODUCTION. book i. 

To resume our subject. — We have seen, that the very advan- 
tages aimed at by the means of a favourable balance of trade, 
are altogether illusory; and that supposing them real, it is imr 
possible for a nation permanently to enjoy them. It remains to 
be shown, what is the actual operation of regulations framed with 
this object in view. 

By the absolute exclusion of specific manufactures of foreign 
fabric, a government establishes a monopoly in favour of the 
home producers of these articles, and in prejudice of the home 
consumers ; that is to say, those classes of the nation which pro- 
duce them, being entitled to their exclusive sale, can raise their 
prices above the natural rate ; while the home consumers, being 
unable to purchase elsewhere, are compelled to pay for them 
unnaturally dear.* If the articles be not wholly prohibited, but 
merely saddled with an import duty, the home producer can then 
increase their price by the whole amount of the duty, and the 
consumer will have to pay the difference. For example, if an 
import duty of 1 fr. per dozen be laid upon earthenware plates 
worth 3 fr. per dozen, the importer, whatever country he may 
belong to, must charge the consumer 4/r.; and the home manu- 
facturer of that commodity is enabled to ask 4/r. per dozen of 
his customers for plates of the same quality; which he could not 

* Ricardo, in his Essay on the Principles of Political Economy and Tax- 
ation, published in 1817, has justly remarked on this passage, that a go- 
vernment can not, by prohibition, elevate a product beyond its natural rate 
of price : for in that case, the home producers would betake themselves in 
greater numbers to its production, and, by competition, reduce the profits 
upon it to the general level. To make myself better understood, I must 
therefore explain, that, by natural rate of price, I mean the lowest rate at 
which a commodity is procurable, whether by commerce or other branch of 
industry. If commercial can procure it cheaper than manufacturing in- 
dustry, and the government take upon itself to compel its production by 
the way of manufacture, it then imposes upon the nation a more chargea- 
ble mode of procurement. Thus, it wrongs the consumer, without giving 
to the domestic producer a profit, equivalent to the extra charge upon the 
consumer; for competition soon brings that profit down to the ordinary 
level of profit, and the monopoly is thereby rendered nugatory. So that, 
although Ricardo is thus far correct in his criticism, he only shows the 
measure I am reprobating to be more mischievous ; inasmuch as it augments 
the natural difficulties in the way of the satisfaction of human wants, with- 
out any counteracting benefit to any class or any individual whatever. 



has been cast, we have no hesitation in saying, that he has done more to 
improve our commercial policy during the short period since he became 
President of the Board of Trade, than all the ministers who have preceded 
him for the last hundred years. And it ought to be remembered to his ho- 
nour, that the measures he has suggested, and the odium thence arising, 
have not been proposed and incurred by him in the view of serving any 
party purpose, but solely because he believed, and most justly, that these 
measures were sound in principle, and calculated to promote the real and 
lasting interests of the public." American Editor. 



CHAP. XVII. ON PRODUCTION. 107 

do without the intervention of the duty; because the consumer 
could get the same article for 3/r.: thus, a premium to the whole 
extent of the duty is given to the home manufacturer out of the 
consumer's pocket. 

Should any one maintain, that the advantage of producing at 
home counterbalances the hardship of paying dearer for almost 
every article; that our own capital and labour are engaged in the 
production, and the profits pocketed by our own fellow citizens ; 
my answer is, that the foreign commodities we might import are 
not to be had gratis ; that we must purchase them with values of 
home production, which would have given equal employment to 
our industry and capital: for we must never lose sight of this 
maxim, that products are always bought ultimately with products. 
It is most for our advantage to employ our productive powers, 
not in those branches in which foreigners excel us, but in those, 
which we excel in ourselves; and with the product to purchase 
of others. The opposite course would be just as absurd, as if a 
man should wish to make his own coats and shoes. What would 
the world say, if, at the door of every house an import duty were 
laid upon coats and shoes, for the laudable purpose of compelling 
the inmates to make them for themselves? Would not people 
say with justice, let us follow each his own pursuits, and buy 
what we want with what we produce, or, which comes to the 
same thing, with what we get for our products. The system 
would be precisely the same, only carried to ridiculous extreme. 

Well may it be a matter of wonder, that every nation should 
manifest such anxiety to obtain prohibitory regulations, if it be 
true that it can profit nothing by them; and lead one to suppose 
the two cases not parallel, because we do not find individual 
householders solicitous to obtain the same privilege. — But the 
sole difference is this, that individuals are independent and con- 
sistent beings, actuated by no contrariety of will, and more inte- 
rested in their character of consumers of coats and shoes to buy 
them cheap, than as manufacturers to sell unnaturally dear. 

Who, then, are the classes of the community so importunate 
for prohibitions or heavy import duties? The producers of the 
particular commodity, that applies for protection from competi- 
tion, not the consumers of that commodity. The pubUc interest 
is their plea; but self-interest is evidently their object. Well, 
but, say these gentry, are they not the same thing ? are not our 
gains national gains? By no means: whatever profit is acquired 
in this manner, is so much taken out of the pockets of a neigh- 
bour and fellow citizen: and, if the excess of charge thrown upon 
consumers by the monopoly could be correctly computed, it 
would be found, that the loss of the consumer exceeds the gain 
of the monopolist. Here, then, individual and public interest are 
in direct opposition to each other; and, since public interest is 
understood by the enlightened few alone, is it at all surprising, 



108 ON PRODUCTION. book i. 

that the prohibitive system should find so many partisans and so 
few opponents'? 

There is in general far too little attention paid to the serious 
mischief of raising prices upon the consumers. The evil is not 
apparent to cursory observation, because it operates piecemeal, 
and is felt in a very slight degree on every purchase or act of 
consumption: but it is really most serious, on account of its con- 
stant recurrence and universal pressure. The whole fortune of 
every consumer is affected by every fluctuation of price in the 
articles of his consumption; the cheaper they are, the richer he 
is, and vice versa. If a single article rise in price, he is so much 
the more poorer in respect of that article ; if all rise together, he 
is poorer in respect to the whole. And, since the whole nation 
is comprehended in the class of the consumers, the whole nation 
must in that case be the poorer. Besides which, it is crippled 
in the extension of the variety of its enjoyments, and prevented 
from obtaining products whereof it stands in need, in exchange 
for those wherewith it might procure them. It is of no use to 
assert, that, when prices are raised, what one gains another loses. 
For the position is not true, except in the case of monopolies; 
nor even to the full extent with regard to them ; for the monopo- 
list never profits to the full amount of the loss to the consumers. 
If the rise be occasioned by taxation or import-duty under any 
shape whatever, the producer gains nothing by the increase of 
price, but just the reverse, as we shall see by and by (Book iii. 
Chapter 7.:) so that, in fact, he is no richer in his capacity of 
producer,, though poorer in his quality of consumer. This is one 
of the most effective causes of national impoverishment, or at 
least one of the most powerful checks to the progress of national 
vi^ealth. 

For this reason, it may be perceived, that it is an absurd dis- 
tinction to view with more jealousy the import of foreign objects 
of barren consumption, than that of raw materials for home manu- 
facture. Whether the products consumed be of domestic or of 
foreign growth, a portion of wealth is destroyed in the act of 
consumption, and a proportionate inroad made into the wealth of 
the community. But that inroad is the result of the act of con- 
sumption, not of the act of dealing with the foreigner; and the 
resulting stimulus to national production, is the same in either 
case. For, wherewith was the purchase of the foreign product 
made? either with a domestic product or with money, which 
must itself have been procured with a domestic product. In 
buying of a foreigner, the nation really does no more than send 
abroad a domestic product in lieu of consuming it at home, and 
consume in its place the foreign product received in exchange. 
The individual consumer himself, probably, does not conduct this 
operation; commerce conducts it for him. No one country can 
buy of another, except with its own domestic products. 



CHAP. xvir. ON PRODUCTION. 109 

In defence of import duties it is often urged, " that when the 
interest of money is lower abroad than at home, the foreign has 
an advantage over the home producer, which must be met by a 
countervailing duty." The low rate of interest is, to the foreign 
producer, an advantage, analogous to that of the superior quality 
of his land. It tends to cheapen the products he raises ; and it 
is reasonable enough that our domestic consumers should take 
the benefit of that cheapness. The same motive will operate 
here, that leads us rather to import sugar and indigo from tropi- 
cal climates, than to raise them in our own. 

" But capital is necessary in every branch of production: so 
that the foreigner, who can procure it at a lower rate of interest, 
has the same advantage in respect to every product; and, if the 
free importation be permitted, he will have an advantage over 
all classes of home-producers." Tell me, then, how his pro- 
ducts are to be paid for. " Why, in specie, and there lies the 
mischief." And how is the specie to be got to pay for them? 
" All the nation has, will go in that way; and when it is exhaust- 
ed, national misery will be complete.'' So then, it is admitted, 
that, before arriving at this extremity, the constant efflux of spe- 
cie will gradually render it more scarce at home, and more abun- 
dant abroad; wherefore, it will gradually rise 1, 2, 3, per cent. 
higher in value at home than abroad; which is fully sufficient to 
turn the tide, and make specie flow inwards faster than it flowed 
outwards. But it will not do so without some returns; and of 
what can the returns be made, but of products of the land, or the 
commerce of the nation? For there is no possible means of 
purchasing from foreign nations, otherwise than with the products 
of the national land and commerce; and it is better to buy of 
them what they can produce cheaper than ourselves, because we 
may rest assured, that they must take in payment what we can 
produce cheaper than they. This they must do, else there must 
be an end of all interchange. 

Again, it is affirmed, and what absurd positions have not been 
advanced to involve these questions in obscurity] that, since al- 
most all the nation are at the same time consumers and produ- 
cers, they gain by prohibition and monopoly as much in the one 
capacity as they lose in the other; that the producer, who gets 
a monopoly-profit upon the object of his own production, is, on 
the other hand, the sufferer by a similar profit upon the objects 
of his consumption ; and thus that the nation is made up of rogues 
and fools, who are a match for each other. It is worth remark- 
ing, that every body thinks himself more rogue than fool ; for, 
although all are consumers as well as producers, the enormous 
profits made upon a single article are much more striking, than 
reiterated minute losses upon the numberless items of consump- 
tion. If an import duty be laid upon calicoes, the additional an- 
nual charge to each person of moderate fortune, may, perhaps, 



no ON PRODUCTION. book i. 

not exceed 12 or 15/r. at most; and probably he does not very 
well comprehend the nature of the loss, or feel it much, though 
repeated in some degree or other upon every thing he con- 
sumes; whereas, possibly, this consumer is himself a manufac- 
turer, say a hat-maker ; and should a duty be laid upon the im- 
port of foreign hats, he will immediately see that it will raise the 
price of his own hats, and probably increase his annual profits by 
many thousand francs. It is this delusion, that makes private 
interest so warm an advocate for prohibitory measures, even 
where the whole community loses more by them as consumers, 
than it gains as producers. 

But, even in this point of view, the exclusive system is preg- 
nant with injustice. It is impossible that every class of produc- 
tion should profit by the exclusive system, supposing it to be uni- 
versal, which, in point of fact, it never is in practice, though 
possibly it may be in law or intention. Some articles can never, 
from the nature of things, be derived from abroad; fresh fish, for 
instance, or horned cattle; as to them, therefore, import duties 
would be inoperative in raising the price. The same may be 
said of masons and carpenters' work, and of the numberless call- 
ings necessarily carried on within the community; as those of 
shopmen, clerks, carriers, retail dealers, and many others. The 
producers of immaterial products, public functionaries and fund- 
holders, lie under the same disability. These classes can none 
of them be invested with a monopoly by means of import duties, 
though they are subjected to the hardship of many monopolies 
granted in that way to other classes of producers.* 

Besides, the profits of monopoly are not equitably divided 
amongst the different classes even of those that concur in the 
production of the commodity, which is the subject of monopoly. 
If the master-adventurers whether in agriculture, manufacture, 
or commerce, have the consumers at their mercy, their labourers 
and subordinate productive agents are still more exposed to their 
extortion, for reasons that will be explained in Book II. So that 
these latter classes participate in the loss with consumers at 
large, but get no share of the unnatural gains of their superiors. 

* There is a sort of malicious satisfaction in the discovery, that those 
who impose these restrictions are usually among the severest sufferers. 
Sometimes they attempt to indemnify themselves by a further act of injus- 
tice ; the public functionaries augment their own salaries, if they have the 
keeping of the public purse. At other times they abolish a monopoly, when 
they find it press peculiarly on themselves. In 1599, the manufacturers of 
Tours petitioned Henry IV. to prohibit the import of gold and silver silk 
stuffs, which had previously been entirely of foreign fabric. They cajoled 
the government by the statement, that they could furnish the whole con- 
sumption of France with that article. The king granted their request, with 
his characteristic facility; but the consumers, who were chiefly the cour- 
tiers and people of condition, were loud in their remonstrances at the con- 
sequent advance of price ; and the edict was revoked in six months. Me- 
moires de Sully, liv. ii. 



CHAP. xvii. ON PRODUCTION. Ill 

Prohibitory measures, besides affecting the pockets of the con- 
sumers, often subject them to severe privations. I am ashamed 
to say, that, within these few years, we have had the hat-makers 
of Marseilles petitioning for the prohibition of the import of fo- 
reign straw or chip hats, on the plea that they injured the sale of 
their own felt hats;* a measure that would have deprived the 
country people and labourers in husbandry, who are so much ex- 
posed to the sun, of a light, a cool, and cheap covering, admirably 
adapted to their wants, the use of which it was highly desirable 
to extend and encourage. 

In pursuit of what it mistakes for profound policy, or to grati- 
fy feelings it supposes to be laudable, a government will some- 
times prohibit or divert the course of a particular trade, and 
thereby do irreparable mischief to the productive powers of the 
nation. When Philip II. became master of Portugal, and for- 
bade all intercourse between his new subjects and the Dutch 
whom he detested, what was the consequence? The Dutch, 
who before resorted to Lisbon for the manufactures of India, of 
which they took off an immense quantity, finding this avenue 
closed against their industry, went straight to India for what they 
wanted, and, in the end, drove out the Portuguese from that 
quarter; and, what was meant as the deadly blow of inveterate 
hatred, turned out the main source of their aggrandizement. 
*' Commerce," says Fenelon, " is like the native springs of the 
rock, which often cease to flow altogether, if it be attempted to 
alter their course. "| 

Such are the principal evils of impediments thrown in the way 
of import, which are carried to the extreme point by absolute 
prohibition. There have, indeed, been instances of nations that 
have thriven under such a system; but then it was, because the 
causes of national prosperity were more powerful, than the causes 
of national impoverishment. Nations resemble the human frame, 
which contains a vital principle, that incessantly labours to repair 
the inroads of excess and dissipation upon its health and consti- 
tution. Nature is active in closing the wounds and healing the 
bruises inflicted by our own awkwardness and intemperance. In 
like manner, states maintain themselves, nay, often increase in 
prosperity, spite of the infinite injuries of every description, which 
friends as well as enemies heap upon them. And it is worth re- 

* Bulletin de la Societe d' Encouragement pour V Industrie Nationals. 
No. 4. 

t The national convention of France prohibited the import of raw hides 
from Spain, on the plea, that they injured the trade in those of France; not 
observing-, that the self-same hides went back to Spain in a tanned state. 
The tanneries of France, being obliged to procure the raw article at too 
dear a rate, were quickly abandoned ; and the manufacture was transferred 
to Spain, along with great part of the capital, and many of the hands em- 
ployed. It is next to impossible for a government, not only to do any good 
to nationaj production by its interference, but even to help doing mischief. 



112 ON PRODUCTION. book i. 

marking, that the most industrious nations are those, which are 
the most subjected to such outrage, because none others could 
survive them. The cry is then ' our system must be the true 
one, for the national prosperity is advancing.' Whereas, were 
we to take an enlightened view of the circumstances, that, for 
the last three centuries, have combined to develop the power and 
faculties of man; to survey with the eye of intelligence the pro- 
gress of navigation, of discovery, of invention in every branch of 
art and science; to take account of the variety of useful animals 
and vegetables that have been transplanted from one hemisphere 
to the other, and to give a due attention to the vast enlargement 
and increased solidity both of science and of its practical appli- 
cation, that we are daily witnesses of, we can not resist the con- 
viction, that our actual prosperity is nothing to what it might have 
been; that it is engaged in a perpetual struggle against the ob- 
stacles and impediments thrown into its way; and that, even in 
those parts of the world where mankind is deemed the most en- 
lightened, a great part of their time and exertions is occupied in 
destroying instead of multiplying their resources, in despoiling 
instead of assisting each other; and all for want of correct know- 
ledge and information respecting their real interests.* 

But, to return to the subject, we have just been examining the 
nature of the injury, that a community sufl'ers by difficulties 
thrown in the way of the introduction of foreign commodities. 
The mischief occasioned to the country, that produces the pro- 
hibited article, is of the same kind and description; it is prevent- 
ed from turning its capital and industry to the best account. But 
it is not to be supposed, that the foreign nation can by this means 
be utterly ruined and stripped of all resource, as Napoleon seem- 
ed to imagine, when he excluded the products of Britain from 
the markets of the continent. To say nothing of the impossi- 
bility of effecting a complete and actual blockade of a whole 
country, opposed as it must be by the universal motive of self- 
interest, the utmost effect of it can only be to drive its production 
into a different channel. A nation is always competent to the 
purchase and consumption of the whole of its own produce, for 
products are always bought with other products. Do you think 
to prevent England from producing value to amount of a million, 
by preventing her export of woollens to that amount? You are 
much mistaken, if you do. England will employ the same capi- 
tal and the same annual labour in the preparation of ardent spi- 

* It is not my design to insinua,te by this, that it is desirable that all 
minds should be imbued with all kinds of knowledge ; but that every one 
should have just and correct ideas of that, in which he is more immediately 
concerned. Nor is the general and complete diffusion of information requi- 
site for the beneficial ends of science. The good resulting from it is pro- 
portionate to the extent of its progress : and the welfare of nations differs 
in degree, according to the correctness of their notions upon those points, 
which most intimately concern them respectively. 



CHAP. XVII. ON PRODUCTION. 113 

rits, by the distillation of grain or other domestic products, that 
were before occupied in the manufacture of woollens for the 
French market, and she will then no longer bring her woollens 
to be bartered for French brandies. A country, in one way or 
other, direct or indirect, always consumes the values it pro- 
duces, and can consume nothing more. If it can not exchange 
its products with its neighbours, it is compelled to produce va- 
lues of such kinds only as it can consume at home. This is the 
utmost effect of prohibitions; both parties are worse provided, 
and neither is at all the richer. 

Napoleon, doubtless, occasioned much injury, both to England 
and to the continent, by cramping their mutual relations of com- 
merce as far as he possibly could. But, on the other hand, he 
did the continent of Europe the involuntry (a) service of facili- 
tating the communication between its different parts, by the uni- 
versality of dominion, which his ambition had well nigh achieved. 
The frontier duties between Holland, Belgium, part of Germany, 
Italy, and France, were demolished ; and those of the other 
powers, with the exception of England, were far from oppressive. 
We may form some estimate of the benefit thence resulting to 
commerce, from the discontent and stagnation that have ensued 
upon the establishment of the present system, of lining the 
frontier of each state with a triple guard of douaniers. All the 
continental states so guarded have, indeed, preserved their for- 
mer means of production; but that production has been made 
less advantageous. 

It can not be denied, that France has gained prodigiously by 
the suppression of the provincial barriers and custom-houses, 
consequent upon her political revolution. Europe had, in like 
manner, gained by the partial removal of the international bar- 
riers between its different political states; and the world at large 
would derive similar benefit from the demolition of those, which 
insulate, as it were, the various communities, into which the hu- 
man race is divided. 

I have omitted to mention other very serious evils of the ex- 
clusive system; as, for instance, the creation of a new class of 
crime, that of smuggling; whereby an action, wholly innocent in 
itself, is made legally criminal: and persons, who are actually 
labouring for the general welfare, are subjected to punishment. 

Smith admits of two circumstances, that, in his opinion, will 



(a) It is rather hard measure to deal out to a fallen despot, to attribute 
all the mischief he has done to design, and all the good to accident ; but 
our author, in his literary character, had received some provocation. The 
grand and obvious benefit of extended dominion is the extension of facility 
of communication over a voider surface ; and a conqueror may fairly be sup- 
posed to have that object in view, if he exhibit any traces of plan or design 
in his operations. Napoleon will scarcely be charged with any vpant of sys- 
tem or object. T. 

23 



114 ON PRODUCTION. book i. 

justify a government in resorting to import-duties : — 1. When a 
particular branch of industry is necessary to the public security, 
and the external supply can not be safely reckoned upon. On 
this account, a government may very wisely prohibit the import 
of gunpowder, if such prohibition be necessary to set the pow- 
der-mills at home in activity ; for it is better to pay somewhat 
dear for so essential an article, than to run the risk of being un- 
provided in the hour of need.* 2. Where a similar commodity 
of home produce is already saddled with a duty. The foreign 
article, if wholly exempt from duty, would in this case have an 
actual privilege ; so that a duty imposed has not the effect of de- 
stroying, but of restoring the natural equilibrium and relative po- 
sition of the different branches of production. 

Indeed, it is impossible to find any reasonable ground for ex- 
empting the production of values by the channel of external com- 
merce from the same pressure of taxation, that weighs upon the 
production effected in those of agriculture and manufacture. 
Taxation is, doubtless, an evil, and one which should be reduced 
to the lowest possible degree; but, when once a given amount 
of taxation is admitted to be necessary, it is but common justice 
to lay it equally on all three branches of industry. The error I 
wish to expose to reprobation is, the notion, that taxes of this 
kind are favourable to production. A tax can never be favoura- 
ble to the public welfare, except by the good use that is made of 
its proceeds. 

These points should never be lost sight of in the framing of 
commercial treaties, which are really good for nothing, but to 
protect industry and capital, diverted into improper channels by 
the blunders of legislation. These it would be far wiser to re- 
medy than to perpetuate. The healthy state of industry and 
wealth is the state of absolute liberty, in which each interest is 
left to take care of itself. The only useful protection authority 
can afford them is, that against fraud or violence. Taxes and 
restrictive measures never can be a benefit: they are at the best 
a necessary evil ; to suppose them useful to the subjects at large, 
is to mistake the foundation of national prosperity, and to set at 
naught the principles of political economy. 

Import duties and prohibitions have often been resorted to as 
a means of retahation: " Your government throws impediments 
in the way of the introduction of our national products: are not 
we, then, justified in equally impeding the introduction of yours?" 
This is the favourite plea, and the basis of most commercial 
treaties; but people mistake their object: granting that nations 
have a right to do one another as much mischief as possible, 

* There is no great wciglit in this plea of justification. For experience 
has shown, that saltpetre is stored ag-ainst the moment of need, in the larg- 
est quantity, when it is most an article of habitual import. Yet the legis- 
lature of France has saddled it with duties amounting to prohibition. 



CHA.P. XVII. ON PRODUCTION. 115 

which by the way I can hardly admit; I am not here disputing 
their rights, but discussing their interests. 

Undoubtedly a nation, that excludes you from all commercial 
intercourse with her, does you an injury ; — robs you, as far as in 
her lies, of the benefits of external commerce; if, therefore, by 
the dread of retaliation, you can induce her to abandon her ex- 
clusive measures, there is no question about the expediency of 
such retaliation, as a matter of mere policy. But it must not be 
forgotten, that retaliation hurts yourself as well as your rival; 
that it operates, not defensively against her selfish measures, but 
offensively against yourself, in the first instance, for the purpose 
of indirectly attacking her. The only point in question is this, 
what degree of vengeance you are animated by, and how much 
you will consent to throw away upon its gratification.* I will 
not undertake to enumerate all the evils arising from treaties of 
commerce, or to apply the principles enforced throughout this 
work to all the clauses and provisions usually contained in them. 
I will confine myself to the remark, that almost every modern 
treaty of commerce has had for its basis the imaginary advan- 
tage and possibility of the liquidation of a favourable balance of 
trade by an import of specie. If these turn out to be chimerical, 
whatever advantage may have resulted from such treaties must 
be wholly referred to the additional freedom and facility of inter- 
national communication obtained by them, and not at all to their 
restrictive causes or provisoes, unless either of the contracting 
parties have availed itself of its superior power, to exact condi- 
tions savouring of a tributary cliaracter; as England has done in 
relation to Portugal. («) In such case, it is mere exaction and 
spoliation. 

* The transatlantic colonies, that have, within those few years thrown 
off their colonial dependence, amongst others, the provinces of La Plata, and 
St. Domingo or Haiti, have opened their ports to foreigners, without any 
demand of reciprocity, and are more rich and prosperous than they ever 
were under the operation of the exclusive system. We are told, that the 
trade and prosperity of Cuba have doubled, since its ports have been open- 
ed to the flags of all nations by a concurrence of imperious circumstances, 
and in violation of the system of the mother-country. The elder states of 
Europe go on like wrong-headed farmers, in a bigoted attachment to their 
old prejudices and methods, while they have examples of the good effects of 
an improved system all aromid them. 



(a) This noted act of diplomacy, which has been the source of infinite 
jealousy, savours nothing of a tributary character, but was framed on the 
basis of reciprocity of partial exemption from duty. It has long been re- 
garded in England as a mere bug-bear. Indeed, since the days of Adam 
Smith, the exclusive measures of Great Britain have been directed, not so 
much to the exploded object of a favourable balance of foreign trade, and 
the consequent influx of specie, as to the no less absurd ends of the mono- 
poly of the home-market, and the maintenance of an inflated scale of money 
price. The duties and prohibitions affecting silk are chiefly directed to 
the former; the partial prohibition of foreign grain to the latter. These 



116 ON PRODUCTION. book i. 

I 

Again, I would observe, that the offer of peculiar advantages 
by one nation to another, in the way of a treaty of commerce, if 
not an act of hostility, is at least one of extreme odium in the 
eyes of other nations. For the concession to one can only be 
rendered effectual by refusal to others. Hence the germ of dis- 
cord and of war with all its mischiefs. It is infinitely more sim- 
ple, and I hope to have shown, more profitable also, to treat all 
nations as friends, and impose no higher duties on the introduc- 
tion of their products, than what are necessary to place them on 
the same footing as those of domestic growth. 

Yet notwithstanding all the mischiefs resulting from the ex- 
clusion of foreign products, which I have been depicting, it would 
be an act of unquestionable rashness abruptly to abolish it. Dis- 
ease is not to be eradicated in a moment ; it requires nursing 
and management to dispense even national benefits. Monopo- 
lies are an abuse, but an abuse in which enormous capital is 
vested, and numberless industrious agents employed, which de- 
serve to be treated with consideration ; for this mass of capital 
and industry can not all at once find a more advantageous chan- 
nel of national production. Perhaps the cure of all the partial 
distresses, that must follow the downfal of that colossal monster 
in politics, the exclusive system, would be as much as the talent 
of any single statesman could accomplish ; yet when one consi- 
ders calmly the wrongs it entails when it is established, and the 
distresses consequent upon its overthrow, we are insensibly led 
to the reflection, that, if it be so difficult to set shackled industry 
at liberty again, with what caution ought we not to receive any 
proposition for enslaving her. 

But governments have not been content with checking the 
import of foreign products. In the firm conviction, that national 
prosperity consists in selling without buying, and blind to the 
utter impossibility of the thing, they have gone beyond the mere 
imposition of a tax or fine upon purchasing of foreigners, and 
have in many instances offered rewards in the shape of bounties 
for selling to them. 

This expedient has been employed to an extraordinary degree 
by the British government, which has always evinced the great- 
est anxiety to enlarge the vents for British commercial and ma- 
nufactured produce.* It is obvious, that a merchant, who re- 

* The political circumstance of England, and her practice of supporting 
and subsidizing military operations on the continent, furnished her with a 
more plausible excuse for attempting to export, in the shape of manufactur- 
ed produce, those values, which she thus expended without return. But she 
hath no need to be at any expense for that purpose. Had England charged 
a seignorage upon the coinage of gold and silver, as she ought to have done, 

objects are fast becoming impracticable and unwise in the opinion of their 
late abettors. T. 



CHAP. XVII. ON PRODUCTION. 117 

ceives a bounty upon export, can, without personal loss, afford 
to sell his goods in a foreign market at a lower rate than prime 
cost. In the pithy language of Smith, * We can not force fo- 
reigners to buy the goods of our own workmen, as we may our 
own countrymen ; the next best expedient, it has been thought, 
therefore, is to pay them for buying.' 

In fact, if a particular commodity, by the time it has reached 
the French market, costs the English exporter 100 /r., his trou- 
ble, &c. included, and the same commodity could be bought in 
France at the same or a less rate, there is nothing to give him 
exclusive possession of the market. But if the British govern- 
ment pays a bounty of 10 fr. upon the export, and thereby ena- 
bles him to lower his demand from 100 to 90 fr. he may safely 
reckon upon a preference. Yet what is this but a free gift of 
10/}\ from the British government to the French consumer? It 
may be conceived, that the merchant has no objection to this 
mode of dealing; for his profits are the same, as if the French 
consumer paid the full value, or cost price, of the commodity. 
The British nation is the loser in this transaction, in the ratio of 
10 per cent, upon the French consumption; and France remits 
in return a value of but 90 fr. for what has cost 100.* 

When a bounty is paid, not at the moment of export, but at 
the commencement of productive creation, the home consumer 
participates with the foreigner in the advantage of the bounty; 
for, in that case, the article can be sold below cost price in the 
home as well as in the foreign market. And if, as is sometimes 
the case, the producer pockets the bounty, and yet keeps up the 
price of the commodity, the bounty is then a present of the go- 
vernment to the producer, over and above the ordinary profits of 
his industry. 

she needed not to have given herself any trouble about the form of the va- 
lues she exported to meet her foreign subsidies and expenditure : guineas 
would themselves have been an object of manufacture, (a) 

* The British government seems not to have perceived, that the most 
profitable sales to a nation are those made by one individual to another 
within the nation; for these latter imply a national production or two va- 
lues, the value sold and that given in exchange. 



(a) So they were without the imposition of a seignorage, which, however, 
should have been charged. But England had no occasion to give bounties 
with a view to facilitate her foreign expenditure. The discount of her bills 
was a sufficient premium to the manufacturer ; and, where that expenditure 
was large, greatly exceeded either drawbacks or bounties. Had specie been 
directly procurable, perhaps it might have saved something to the govern- 
ment, in the reduced profit payable to the merchants upon a mere complex 
operation. But the merchants must have made their profit upon bullion. 
The sole difference occasioned by the absurdity of gratuitous coinage was, 
the expense incurred in that coinage ; but the imposition of a seignorage 
would neither have promoted the import of bullion, nor facilitated its trans- 
port to the scene of expenditure. T. 



118 ON PRODUCTION. book i. 

When, by the means of a bounty, a product is raised either for 
home or foreign consumption, which would not have been raised 
without one, the effect is, an injurious production, one that costs 
more than it is worth. Suppose an article, when completely 
finished off, to be saleable for 24 /r. and no more, but its prime 
cost, including of course the profits of productive industry, to 
amount to 27 fr., it is quite clear, that nobody will volunteer the 
production, for fear of a loss of 3/r. But if the government, 
with a view to encourage this branch of industry, be willing to 
defray this loss, in other words, if it offer a bounty of 3/r. to the 
producer, the production can then go on, and the public revenue, 
that is to say, the nation at large, will be a loser of 3 /r. And 
this is precisely the kind of advantage, that a nation gains by en- 
couraging a branch of production, which cannot support itself: 
it is in fact urging the prosecution of a losing concern, the pro- 
duce of which is exchanged, not for other produce, but for the 
bounty given by the state. 

Wherever there is any thing to be made by a particular em- 
ployment of industry, it wants no encouragement ; where there is 
nothing to be made, it deserves none. There is no truth in the 
argument, that perhaps the state may gain, though individuals can 
not; for how can the state gain, except through the medium of 
individuals? Perhaps it may be said, that the state receives 
more in duties than it pays in bounties; but suppose it does, it 
merely receives with one hand and pays with the other : let the 
duties be lowered to the whole amount of the bounty, and pro- 
duction will stand precisely where it did before, with this differ- 
ence in its favour, viz. that the state will save the whole charge 
of management of the bounties, and part of that of the duties. 

Though bounties are chargeable, and a dead loss to the gross 
national wealth, there are cases in which it is politic to incur that 
loss; (1) as when a particular product is necessary to public se- 
curity, and must be had at any rate, however extravagant. Louis 
XIV., with a view to restore the marine of France, granted a 
bounty of 5/r. per ton upon every ship fitted out in France. His 
object was to train up sailors. So likewise when the bounty is 
the mere refunding of a duty previously exacted. The bounty 
paid by Great Britain upon the export of refined sugar is nothing 
more than the reimbursement of the import duties upon musco- 
vado and molasses. 

Perhaps, too, it may be wise in a government to grant a pre- 
mium on a particular product, which, though it make a loss in 
the outset, holds out a fair prospect of profit in a few years' time. 
Smith thinks otherwise: hear what he says on the subject. ' No 
regulation of commerce can increase the quantity of industry in 



(1) [Vide Note, page 47.] 



CHAP. XVII. ON PRODUCTION. 119 

any society, beyond what its capital can maintain. It can only 
divert a part of it into a direction, into which it might not other- 
wise have gone ; and it is by no means certain, that this artificial 
direction is likely to be more advantageous to the society, than 
that into which it would have gone of its own accord. — The 
statesman, who should attempt to direct private people in what 
manner they ought to employ their capitals, would not only load 
himself with a most unnecessary attention, but assume an au- 
thority, which could safely be trusted, not only to no sifigle per- 
son, but to no council or senate whatever; and which would no 
where be so dangerous, as in the hands of a man, who had folly 
and presumption enough to fancy himself fit to exercise it. — 
Though, for want of such regulations, the society should never 
acquire the proposed manufacture, it would not upon that ac- 
count necessarily be the poorer in any one period of its duration. 
In every period of its duration, its whole capital and industry 
might still have been employed, though upon different objects, in 
the manner that was most advantageous at the time.'* 

And Smith is certainly right in the main; though there are 
circumstances that form exceptions to the general rule, ' that 
every one is the best judge how to employ his industry and capi- 
tal.' Smith wrote at a period and in a country, where personal 
interest is well understood, and where any profitable mode of in- 
vesting capital and industry is not likely to be long overlooked. 
But every nation is not so far advanced in intelligence. How 
many countries are there, where many of the best employments 
of capital are altogether excluded by prejudices, that the govern- 
ment alone can remove? How many cities and provinces, 
where certain established investments of capital have prevailed 
from time immemorial] In one place, every body invests in 
landed property, in another in houses, and in others still in pub- 
lic offices, or national funds. Every unusual application of the 
power of capital is, in such places, contemplated with distrust or 
disdain ; so that partiality shown to a profitable mode of employ- 
ing industry or capital may possibly be productive of national ad- 
vantage. 

Moreover, a new channel of industry may ruin an unsupported 
speculator, though capable of yielding enormous profit, when 
the labourers shall have acquired practice, and the novelty has 
once been overcome. France at present contains the most 
beautiful manufactures of silk and of woollen in the world, and 
is probably indebted for them to the wise encouragement of Col- 
bert's administration. He advanced to the manufacturers 2000 
/r. for every loom at work ; and, by the way, this species of en- 
couragement has a very peculiar advantage. In ordinary cases, 
whatever the government levies upon the produce of individual 

* Wealth of Nations, book iv. c. 9. 



120 ON PRODUCTION. book i. 

exertion is wholly lost to future production; but, in this instance, 
a part was employed in reproduction; a portion of individual re- 
venues was thrown into the aggregate productive capital of the 
nation. This was a degree of wisdom one could hardly have 
expected, even from personal self-interest* 

It would be out of place here to inquire, how wide a field 
bounties open to peculation, partiality, and the whole tribe of 
abuses incident to the management of public affairs. The most 
enlightened statesman is often obliged to abandon a scheme of 
evident public utility, by the unavoidable defects and abuses in 
the execution. Among these, one of the most frequent and pro- 
minent is, the risk of paying a premium, or granting a favour to 
the pretensions, not of merit, but of importunity. In other re- 
spects, I have no fault to find with the honours, or even pecu- 
niary rewards publicly given to artists or mechanics, in recom- 
pense of some extraordinary feat of genius or address. Rewards 
of this kind excite emulation, and enlarge the stock of general 
knowledge, witiiout diverting industry or capital from their most 
beneficial channels. Besides, they cost nothing in comparison 
of bounties of another description. The bounty on the export of 
wheat has, by Smith's account, cost England in some years as 
much as seven millions of our/r. I do not believe that the Bri- 
tish or any other government, ever spent the fiftieth part of that 
sum upon agriculture in any one year. 



SECTION II. 

Of the Effect of Regulations fixing the Manner of Production. 

The interference of the public authority, with regard to the 
details of agricultural production, has generally been of a benefi- 
cial kind. The impossibility of intermeddling in the minute and 
various details of agriculture, the vast number of agents it occu- 
pies, often widely separated in locality and pursuits, from the 
largest farming concerns to the httle garden of the cottager, the 
small value of the produce in comparison with its volume, are so 
many obstacles, that nature has placed in the way of authorita- 
tive restraint and interference. AH governments, that have pre- 
tended to the least regard for the public welfare, have conse- 
quently confined themselves to the granting- of premiums and 
encouragements, and to the diffusion of knowledge which has 
often contributed largely to the progress of this art. The vete- 
rinary college of Alfort, the experimental farm of Rambouillet, 

* I am far from equally approving all the encouragements of this kind 
held out by this minister ; particularly the smns lavished on several esta- 
blishments of pure ostentation, which, like that of the Gobelin tapestry, 
have constantly cost more than they have produced. 



CHAP. XVII. ON PRODUCTION. 121 

the introduction of t!ie merino breed, are real benefits to the agri- 
culture of France, the enlargement and perfection of which she 
owes to the providence of the different rulers, that her political 
troubles have successively brought into power. 

A national administration, that guards with vigilance (he faci- 
lity of communication, and the quiet prosecution of the labours 
of husbandry, or punishes acts of culpable negligence, as the de- 
stroying of caterpillars* and other noxious insects, does a service 
analogous to the preservation of civil order and of property, with- 
out which production must cease altogether. 
■ The regulations relative to the felling of trees in France, how- 
ever indispensable for the preservation of their growth, at least 
in many of their provisions, appear in others rather to operate as 
a discouragement of that branch of cultivation, which, though 
particularly adapted to certain soils and sites, and conducive to 
the attraction of atmospheric moisture, yet seems to be daily on 
the decline. 

But there is no branch of industry, that has suffered so much 
from the officious interference of authority in its details, as that 
of manufacture. 

Much of that interference has been directed towards limiting 
the number of producers, either by confining them to one trade 
exclusively, or by exacting specific terms, on which they shall 
carry on their business. This system, gave rise to the establish- 
ment of chartered companies and incorporated trades. The ef- 
fect is always the same, whatever be the means employed. An 
exclusive privilege, a species of monopoly, is created, which the 
consumer pays for, and of which the privileged persons derive all 
the benefit. The monopolists can prosecute their plans of self- 
interest with so much the more ease and concert, because they 
have legal meetings, and a regular organization. At such meet- 
ings, the prosperity of the corporation is mistaken for that of 
commerce and of the nation at large; and the last thing consider- 
ed is, whether the proposed advantages be the result of actual 
new production, or merely a transfer from one pocket to another, 
from the consumers to the privileged producers. This is the 
true reason, why those engaged in any particular branch of trade 
are so anxious to have themselves made the subject of regula- 

* Under the old regime of the canton of Berne, every proprietor of land 
was required to furnish, in the proper season of the year, so many bushels 
of cockchafers, in proportion to the extent of his property. The rich land- 
holders were in the habit of buying their contingents from the poorer sort 
of people, who made it their business to collect them, and did it so effectu- 
ally, that the district was ultimately cleared of them. But the extreme 
difficulty, that even the most provident government meets with in doing 
good by its interference in the business of production, may be judged of by 
a fact of which I am credibly assured ; viz. that this act of paternal care 
gave rise to the singular fraud of transporting»these insects in sacks from 
the Savoy side of the Lehman lake into the Fays de Vaud. 

24 



122 ON PRODUCTION". booki 

tion; and the public authorities are commonly, on their part, very 
ready to indulge them in what offers so fair an opportunity of 
raising a revenue. 

Moreover, arbitrary regulations are extremely flattering to the 
vanity of men in power, as giving them an air of wisdom and 
foresight, and confirming their authority, which seems to derive 
additional importance from the frequency of its exercise. There 
is, perhaps, at this time no country in Europe where a man is 
free to dispose of his industry and capital in what manner he 
pleases ; in most places he can not even change his occupation 
or place of residence at pleasure. It is not enough for a man 
to have the necessary qualifications of ability and inclination to 
become a manufacturer or dealer in the woollen or silk line, in 
spirits or calicoes; he must besides have served his time, or been 
admitted to the freedom of the craft.* Freedoms and appren- 
ticeships are likewise expedients of police, not of that wholesome 
branch of pohce, whose object is the maintenance of public and 
private security, and which is neither costly and vexatious ; but 
of that sort of police, which bad governments employ to preserve 
or extend their personal authority at any expense. By the dis- 
pensation of honorary or pecuniary advantages, authority can ge- 
nerally influence the chiefs and superiors it has appointed to the 
corporations, who think to earn these honours and emoluments 
by their subservience to the power that confers them. These are 
the ready tools for the management of the body at large, and vo- 
lunteer to denounce the individuals, whose firmness may be for- 
midable, and report those, whose servility may be reckoned upon, 
and all under the pretext of public good. Official harangues and 
public addresses are never wanting in plausible reasons for the 
continuance of old restrictions on liberty of action, or for the es- 
tablishment of new ones ; for there is no cause so bad, as to be 
without some argument or other in its favour. 

The chief advantage, and the one most relied upon, is, the 
insurance of a more perfect execution of the products raised for 
consumption, and of a superiority in them highly favourable to 
the national commerce, and calculated to secure the continued 
demand of foreigners. But does this advantage result from the 
system in question? what security is there that the corporate 
body itself will always be composed of men not merely of integ- 
rity, but of scrupulous delicacy, such as would never be disposed 
to take in either their own countrymen or foreigners? We are told, 
that this system facilitates the enforcement of regulations for the 

* When industry made its first start in the middle ages, and the mercan- 
tile classes Avere exposed to the rapacity of a grasping and ignorant nobility, 
incorporated trades and crafts were useful in extending to individual indus- 
try the protection of the association at large. Their utility has ceased al- 
together of late years ; for governments have, in our days, been either too 
enlightened to encroach upon the sources of financial prosperity, or too 
powerful to stand in awe of such associations. 



CHAP. xvii. ON PRODUCTION. 123 

warranty and verification of the quality of products ; but are not 
such regulations illusory in practice, even under the corporate sys- 
tem? and, supposing them absolutely necessary, is there no njore 
simple way of enforcing them"? 

Neither will the length of apprenticeship be a better guarantee 
of the perfection of the work ; the only thing to be depended 
upon for that perfection is the skill of the workman, and that is 
best attained by paying him in proportion to his superiority. 'To 
teach any young man,' says Smith, ' in the completest manner 
how to apply the instruments, and how to construct the machines, 
of the common mechanic trades, can not well require the lessons 
of more than a few Vt'eeks, perhaps those of a few days might be 
sufficient. The dexterity of hand, indeed, even in common trades, 
can not be acquired without much practice and experience ; but 
a young man would practise with much more diligence and atten- 
tion, if from the beginning he wrought as a journeyman, being 
paid in proportion to the little work which he could execute, and 
paying in his turn for the materials which he might sometimes 
spoil through awkwardness and inexperience.'* 

Were apprentices bound out a year later, and the interval spent 
in schools conducted on the plan of mutual instruction, I can 
hardly think the products would be worse executed; and, beyond 
all doubt, the labouring class would be advanced a stage in civi- 
lization. 

Were apprenticeships a sure means of attaining a greater per- 
fection of products, those of Spain would be as good as those of 
Britain. It was not before incorporated trades and compulsory 
apprenticeships had been abolished in France, that she attained 
that superiority of execution she has now to boast of. 

Perhaps there is no one mechanic art nearly so difficult as that 
of the gardener or field labourer ; yet this is almost the only one 
that has no where been subjected to apprenticeship. Are vege- 
tables and fruits produced in less abundance or perfection 1 Were 
cultivators a corporate body, I suppose it would soon be asserted, 
that high-flavoured peaches and white heart lettuces, could not 
be raised without a code of some hundred well penned articles. 

After all, regulations of this nature, even admitting their utility, 
must be nugatory as soon as evasion is allowed ; now it is noto- 
rious, that there is no manufacturing town, where money will not 
purchase exemption. So that they are more than merely useless 
as a warranty of quality ; inasmuch as they are an engine of the 
most odious injustice and extortion. 

In support of these opinions, the advocates for the corporate 
system appeal to the example of Great Britain, where industry 
is well known to be greatly shackled, and yet manufactures pros- 
per. But in this they expose their ignorance of the real causes of 

* Wealth of Nations, book i. c. 10. 



124 ON PRODUCTION. book i. 

that prosperity. " These causes," Smith tells us, " seem to be, 
the general liberty of trade, which, notwithstanding some re- 
straints, is at least equal, perhaps superior, to what it is in any 
other country; the liberty of exporting, duty free, almost all sorts 
of goods, which are the produce of domestic industry, to almost 
any foreign country; and, what perhaps is of still greater import- 
ance, the unbounded liberty of transporting them from any one 
part of our own country to any other, without being obliged to 
give any account to any public olBce, without being liable to 
question or examination of any kind, &c."* Add to these, the 
complete inviolability of all property whatever, either by public or 
private attack, the enormous capital accumulated by her industry 
and frugality, and lastly, the habitual exercise of attention and 
judgment, to which her population, is trained from the earliest 
years ; and there is no need of looking farther for the causes of 
the manufacturing prosperity of Britain. 

Those, who cite her example in justification of their desire to 
enthral the exertions of industry, are not perhaps aware, that the 
most thriving towns in that kingdom, those on which her charac- 
ter for manufacturing pre-eminence is mainly built, are the very 
places, where there are no incorporations of crat'ts and trades. 
Manchester, Birmi;-gham, and Liverpool,! were mere villages a 
century or two ago, but now rank in point of wealth and popula- 
tion next to London, and much before York, Canterbury, and 
even Bristol, cities of the greatest antiquity and privileges, and 
the capitals of her most thriving provinces, but still subjected to 
the shackles of these Gothic institutions. "The town and parish 
of Halifax," says Sir John Nickols,;]; a writer of acknowledged 
local information, " has, within these forty years, seen the num- 
ber of its inhabitants quadrupled ; whilst many other towns, sub- 
jected to corporations, have experienced a sensible diminution of 
theirs. Houses situated within the precincts of the city of London 
hardly find tenants, and numbers of them remain empty; whilst 
Westm.inster, Southwark, and the other suburbs are continually 
increasing. These suburbs are free, whilst London supports 
within itself four score and twelve exclusive companies of all 
kinds, of which we may see the members annually adorn, with a 
silly pageantry, the tumultuous triumphal procession of the Lord 
Mayor." 

* Wealth of Nations, book iv. c. 7. t Baeii. vol. i. p. 107. 

t Remarks on the Advantages and Disadvantages of France and of Great 
Britain, 12mo. 1754, § 4. p. 142. (a) 



(a) This work was originally published in French in 1752, with great 
success, under the fictitious name of Sir John Nickols, and is supposed to 
have been the i)roduction of a foreigner employed about the court of Ver- 
sailles. It contains many judicious remarks upon the internal policy of 
Britain. T. 



CHAP. XVII. ON PRODUCTION. 125 

The prodigious manufiicturing activity of some of the suburbs 
of Paris is notorious; of the Faubourg St. Antoine, in particular, 
where industry enjoyed many exemptions. Some products were 
made no where else. How happened it, that without apprentice- 
ships, or the necessity of being free of the craft, the manufacturer 
required a greater degree of skill, than in the rest of the city, 
which was subject to those institutions, that are held up as so in- 
dispensable? For a very simple reason; because self-interest is 
the best of all instructors. 

An example or two will serve better than all reasoning in 
the world, to show the impediments thrown in the way of 
the development of industry by incorporations of trades and 
crafts. Argand, the inventor of the lamps that go by his name, 
and yield at the same expense, triple the amount of light, was 
dragged before the Farlement de Paris, by the company of tin- 
men, locksmiths, ironmongers, and journeymen farriers, who 
claimed the exclusive right of making lamps.* Lenoir ^ the cele- 
brated Parisian philosophical and mathematical instrument maker, 
had set up a small furnace for the convenience of working the 
metals used in his business. The syndics of the founders' com- 
pany came in person to demolish it; and he was obliged to apply 
to the king for protection. Thus was talent rendered dependent 
upon court favour. The manufacture of japanned hardware Avas 
altogether excluded from France until the era of the revolution, by 
the circumstance of its requiring the skill and implements of many 
different trades, and the necessity of being admitted to the free- 
dom of them all, before an individual could carry it on. It would 
be easy to fill a volume with the recapitulation of the dishearten- 
ing vexations, that personal industry had to encounter in the city 
of Paris alone, under the corporate system; and another with that 
of the successful efforts made, since that system was abolished 
by the revoliuion. 

For the same reason, that the free suburb of a chartered town, 
or a free town in the midst of a country embarrassed by the offi- 
ciousness of a meddling government, will exhibit an unusual de- 
gree of prosperity, a nation that enjoys the freedom of industry, 
in the midst of others following the corporate system, would pro- 
bably reap similar advantages. Those have thriven the most, 
that have been the least shackled by the observance of formali- 
ties, provided of course, that individuals be secured from the 
exactions of power, the chicanery of law, and the attempts of 
dishonesty or violence. Sully, whose whole life was spent in the 
study and practice of measures for improving the prosperity of 

*""Why not get himself made free of the company?" say those who are 
ever ready to palliate or justify official abuse. The corporation, which had 
the control over admissions, was itself interested in thwarting a dangerous 
competitor. Besides, why compel the ingenious inventor to waste in a per- 
sonal canvas, that time, which would be so much more profitably occupied 
in his calling ? 



126 ON PRODUCTION. book i. 

France, entertained this opinion.* In his memoirs, he notices 
the multiplicity of useless laws and ordinances, as a direct bar- 
rier to the national progress, j" 

It may, perhaps, be alleged, that, were all occupations quite 
free, a large proportion of those who engaged in them would fall 
a sacrifice to the eagerness of competition. Possibly they might, 
in some few instances; although it is not very likely there should 
be a great excess of candidates in a line, that held out but little 
prospect of gain ; y3t, admitting the casual occurrence of this 
evil, it would be of infinitely less magnitude, than permanently 
keeping up the prices of produce at a rate that must limit its con- 
sumption, and abridge the power of purchasing in the great body 
of consumers. 

If the measures of authority, levelled against the free disposi- 
tion of each man's respective talents and capital, are criminal in 
the eye of sound policy, it is still more difficult to justify them 
upon the principles of natural right. " The patrimony of a poor 
man," says the author of the Wealth of Nations, " lies in the 
strength and dexterity of his hands : and to hinder him from em- 
ploying this strength and dexterity in what manner he thinks pro- 
per, without injury to his neighbour, is a plain violation of his 
most sacred property." 

However, as society is possessed of a natural right to regulate 
the exercise of any class of industry, that without regulation 
might prejudice the rest of the community, physicians, surgeons, 
and apothecaries, are with perfect justice subjected to an exami- 
nation into their professional ability. The lives of their fellow- 
citizens are dependent upon their skill, and a test of that skill 
may fairly be established; but it does not seem advisable to limit 
the number of practitioners nor the plan of their education. So- 
ciety has no interest further than to ascertain their qualification. 

On the same grounds, regulation is useful and proper, when 
aimed at the prevention of fraud or contrivance, manifestly inju- 
rious to other kinds of production, or to the public safety, and not 
at prescribing the nature of the products and the methods of fa- 

* Liv. xix. 

■f Colbert's early education in the counting-house of the Messrs. Mascrani, 
of Lyons, a very considerable mercantile establishment, very early imbued 
him vi^ith the principles of the manufacturers. Commerce and manufacture 
thrived prodigiously under his powerful and judicious patronage ; but, 
though he liberated, them from abundance of oppression, he was himself 
hardly sparing enough of ordinances and regulations ; he encouraged manu- 
factures at the expense of agriculture, and saddled the people at large with 
the extraordinary profits of monopolists. We can not shut our eyes to the 
fact, that to this system, acted upon ever since the days of Colheii, France 
owed the striking inequalities of private fortune, the overgrown wealth of 
some, and the superlative misery of others ; the contrast of a few splendid 
establishments of industry, with a wide waste of poverty and degradation. 
This is no ideal picture, but one of sad reality, which the study of princi- 
ples will help us to explain. 



CHAP. xvii. ON PRODUCTION. 127 

brication. Thus, a manufacturer must not be allowed to adver- 
tise his goods to the public as of better than their actual quality: 
the home consumer is entitled to the public protection against 
such a breach of faith ; and so, indeed, is the mercantile charac- 
ter of the nation, which must suffer in the estimation and demand 
of foreign customers from such practices. And this is an exception 
to the general rule, that the best of all guarantees is the personal 
interest of the manufacturer. For, possibly, when about to give 
up business, he may find it answer to increase his profit by a 
breach of faith, and sacrifice a future object he is about to relin- 
quish for a present benefit. A fraud of this kind ruined the French 
cloths in the Levant market, about the year 1783 ; since when 
the German and British have entirely supplanted them.* — We 
may go still further. An article often derives a value from, the 
name, or from the place of its manufacture. When we judge from 
long experience, that cloths of such a denomination, and made at 
such a place, will be of a certain breadth and substance, it is a 
fraud to fabricate, under the same name and at the same place, 
a commodity of inferior substance and quality to the ordinary 
standard, and thus to send it into the world under a false certifi- 
cate. 

Hence we may form an opinion of the extent, to which govern- 
ment may carry its interference with benefit. The correspon- 
dence with the sample of conditions, express or implied, must 
be rigidly enforced, and government should meddle with produc- 
tion no further. I would wish to impress upon my readers, that 
the mere interference is itself an evil, even where it is of use i"!" 
first, because it harasses and distresses individuals; and, second- 
ly, because it costs money, either to the nation, if it be defrayed 
by government, that is to say, charged upon the public purse, or 
to the consumer, if it be charged upon the specific article; in the 
latter case, the charge must of course, enhance the price, there- 
by laying an additional tax upon the home consumer, and pro 
tanto discouraging the foreign demand. 

If interference be an evil, a paternal government will be most 
sparing of its exercise. It will not trouble itself about the certi- 
fication of such commodities, as the purchaser must understand 
better than itself; or of such as can not well be certified by its 
agents ; for, unfortunately, a government must always reckon 
upon the negligence, incapacity, and misconduct of its retainers. 
But some articles may well admit of certification ; as gold and 
silver, the standard of which can only be ascertained by a com- 

* The loss of this trade has been erroneously imputed to the liberty of 
commerce, consequent upon the revolution. But Felix Beaujour, in his 
Tableau du Commerce de la Grece, has shown, that it must be referred to 
an earlier period, when restrictions were still in force. 

t " Every restraint, imposed by legislation upon the freedom of human 
action, must inevitably extinguish a portion of the energies of the commu- 
nity, and abridge its annual product." Verri, Rejl. sur VEcon. Pol. c. 12. 



128 ON PRODUCTION. book i. 

plex operation of chemistry, which few purchasers know how to 
execute, and which, if they did, would cost them infinitely more, 
than it can be executed for by the government in their stead. 

In Great Britain, the individual inventor of a new product or 
of a new process may obtain the exclusive right to it, by obtain- 
ing what is called a patent. While the patent remains in force, 
the absence of competitors enables him to raise his price far 
above the ordinary return of his outlay with interest, and the 
wages of his own industry. Thus he receives a premium from 
the government, charged upon the consumers of the new article; 
and this premium is often very 1 irge, as may be supposed, in a 
country so immensely productive as Great Britain, where there 
are consequently abundance of affluent individuals, ever on the 
lookout for some new object of enjoyment. Some years ago, a 
man invented a spiral or worm spring for insertion between the 
leather braces of carriages to ease the motion, and made his for- 
tune by the patent for so trifling an invention. 

Privileges of this kind no one can reasonably object to ; for 
they neither interfere with, nor cramp any branch of industry, 
previously in operation. Moreover, the expense incurred is 
purely voluntary; and those, who chose to incur it, are not 
obliged to renounce the satisfaction of any previous wants, either 
of necessity or of amusement. 

However, as it is the duty of every government to aim at the 
constant amelioration of its subjects' condition, it can not deprive 
other producers to eternity of the right to employ part of their 
industry and capital in this particular channel, which perhaps they 
might sooner or later have themselves discovered, or preclude 
the consumer for a very long period from the advantages of a 
competition-price. Foreign nations, being out of its jurisdiction, 
would of course grant no privilege to the inventor, and would, 
therefore, in this particular, during the operation of the patent, be 
better oflfthan the nation where the invention originated. 

France* has imitated the wise example of England, in assign- 
ing a limit to the duration of these patent rights, after which the 
invention is free for aU the world to avail themselves of. It is 
also provided, that, if the process be capable of concealment, it 
shall be divulged at the expiration of the term. And the patentee, 
who in this case, it may be supposed, could do without the pa- 
tent, has this advantage : that if his secret be discovered by any 
body in the interim, it can not be made available till the expiration 
of the term. 

Nor is it at all, necessary, that the government should inquire 
into the novelty or utility of the invention ; for, if it be useless, 
so much the worse for the inventor ; and, if it be already known, 
every body is competent to plead and prove that fact, and the 

* Vide the laws dated 7th Jan. and 25th May, 1791, and 20th Sept. 1792. 
Also the arret of the government, dated 5 Vendemaire, an. ix. 



CHAP. XVII. ON PRODUCTION. 129 

previous right of the public ; so that the only sufferer is the in- 
ventor, who has been at the expense of a patent for nothing. 
Thus the public is no loser by this species of encouragement, 
but, on the contrary, may derive prodigious advantage. 

The regulations tending to direct either the object or the me- 
thod of production, which have been above observed upon, by no 
means comprise all the measures adopted by different nations 
with those views. Indeed, were I to specify them all, my cata- 
logue would soon be incomplete ; for new ones are every day 
brought into practice. The great point is, to lay down certain 
principles, that may enable us beforehand to judge of their con- 
sequences. But there are two other branches of commerce, that 
have been the subject of more than usual regulation, and are, 
therefore, worthy of more especial investigation. I shall devote 
the two succeeding sections to their exclusive examination. 



SECTION III. 

Of Privileged Trading Companies. 

A GOVERNMENT Sometimes grants to individual merchants, 
and much oftener to trading companies, the exclusive privilege 
of buying and selhng specific articles, tobacco for example ; or 
of trafficking with a particular country, as with India. 

The privileged traders, being thus exempted from all com- 
petition by the exertion of the public authority, can raise their 
prices above the level, that could be maintained under the appel- 
lation of a free trade. This unnatural ratio of price is some- 
times fixed by the government itself, which thus assigns a limit 
to the partiality it exercises towards the producers, and the in- 
justice it practises upon the consumers : otherwise, the avarice 
of the privileged company would be bounded only by the dread 
of losing more by the reduction of the gross amount of its sales, 
in consequence of increased prices, than it would gain by their 
unnatural elevation. At all events, the consumer pays for the 
commodity more than its worth ; and government generally con- 
trives to share in the profits of monopoly. 

It has been said, for the most ruinous expedient is sure to find 
some plausible argument or other to support it, that the com- 
merce with certain nations requires precautionary measures, 
which privileged companies only can enforce. At one time 
the plea is, that forts must be built, and marine establishments 
kept up ; as if in truth it were worth while to traffic sword in 
hand, or an army were necessary to protect plain dealing ; or as 
if the state did not already maintain at great charge a military 
force for the protection of its subjects ! At another, that diplo- 
matic address is indispensable. The Chinese, for instance, are 

25 



130 ON PRODUCTION. book i. 

a people so bigoted to form and prone to suspicion, so entirely 
independent of other nations, by reason of their remote position, 
the extent of their territory, and the pecuHar character of their 
wants, that it is a matter of special and precarious favour to be 
allowed to deal with them. We must, therefore, elect either to 
go without their teas, silks, and nankeens, or be content to sub- 
mit to precautions, which can alone ensure the continuance of 
the trade ; for the dealings of individuals might endanger the 
continuance of that good humour, without which the mutual in- 
tercourse of the two nations would be at an end. 

But let me ask, is it so certain, that the agents of a company, 
who are too apt to presume upon the support of the military 
power, either of the nation, or at least of the company, — is it 
quite certain, that such agents are more likely to keep aUve an 
amicable feeling, than private traders, in whom more deference 
to local institutions might be expected, and who would have an 
immediate interest in keeping clear of any misunderstanding, 
that should endanger both their persons and their property?* 

But supposing the worst that could happen, and granting 
for argument's sake that the trade with China can not be con- 
ducted otherwise than by a privileged company, does it follow, 
that without one we must needs give up the taste for Chinese 
productions 1 Certainly not. The trade in Chinese goods will 
always exist, for this plain reason, that it suits both parties, the 
Chinese and their customers. But shall we not pay dearer for 
those goods? There is no ground for thinking so. Three 
fourths of the European states have never sent a single ship to 
China, and yet are abundantly supplied with teas, with silks, 
and with nankeens, and that too at a very cheap rate. 

There is another argument of more general application, and 
still more frequently urged ; viz. that a company, having the ex- 
clusive trade of any given country, is exempt from the elTects 
of competition, and, therefore, buys at a less price. But, in the 
first place, it is not true that the exclusive privilege exempts 
from the effect of competition ; the only competition it removes, 
is that of the national traders, which would be of the utmost 
benefit to the nation ; but it excludes neither the competition of 
foreign companies, nor of foreign private traders. In the next 
place, there are many articles that would not rise in price in 
consequence of the competition, which some people afiect to be 
alarmed at, though in truth it is a mere bug- bear. 

* This has been exemplified in the commercial relations of the United 
States with China. The American traders conduct themselves at Canton 
with more discretion, and are regarded by the Chinese authorities with less 
jealousy, than the agents of the English company. The Portuguese, for 
upwards of a century, carried on the trade with the Eastern seas, without 
the intervention of a company, and with greater success than any of their 
cotemporaries. 



CHAP. xvn. ON PRODUCTION. 131 

Suppose Marseilles, Bourdeaux, L'Orient, were all to fit out 
vessels to bring tea from China, we have no reason to believe, 
that all their ventures together would import more tea into 
France, than France could consume or dispose of. All we have 
to fear is, that they should not import enough. Now, if they 
were to import no more than other merchants would have import- 
ed for them, the demand for tea in China will have been just 
the same in both cases ; consequently, the commodity will not 
have become more scarce there. Our merchants would hardly 
have to pay dearer for it, unless the price should rise in China 
itself; and what sensible effect could the purchases of a few 
merchants of France have upon the price of an article, consumed 
in China itself, to one hundred times the amount of the whole 
consumption of Europe? 

But, granting that European competition would operate to 
raise the price of some comm.odities in the eastern market, is 
that a sufficient motive for excepting the trade to that part of the 
world from the general rules, that are acted upon in all other 
branches of commerce'? Are we to invest an exclusive company 
with the sole conduct of the import or export trade between Ger- 
many and France, for the sole purpose of getting our cottons 
and woollens from Germany at a cheaper rate? If the commerce 
of the East were put upon the same footing as foreign trade in 
general, the price of any one article of its produce could never 
long remain much above the cost price of production in Asia ; 
for the rise of price would operate as a stimulus to increasad 
production, and the competition of sellers would soon be on a 
par with that of purchasers. 

But, admitting the advantage of buying cheap to be as sub- 
stantial as it is represented, the nation at large has a right to 
participate in that cheapness ; the home consumers ought to buy 
cheap, as well as the company. Whereas in practice it is just 
the reverse, and for a very simple reason : the company is not 
exempt from competition as a purchaser, for other nations are 
its competitors : but as a seller it is exempt; for the rest of the 
nation can buy the articles it deals in no where else, the import 
by foreigners being wholly prohibited. It asks its own price, 
and can command the market, especially if it be attentive to 
keep the market always understocked, as the English call it ; 
that is, if the supply be just so far short of the demand, as to 
keep alive the competition of purchasers.* 

In this manner, trading companies not only extort usurious 
profits from the consumer, but moreover saddle him with all 
the fraud and mismanagement inseparable from the conduct of 

* It is well known, that, when the Dutch were in possession of the Mo- 
luccas, they were in the habit of burning part of the spices they produced, 
for the sake of keeping up the price in Europe. 



132 ON PRODUCTION. book i. 

these unwieldy bodies, with their cumbrous organization of di- 
rectors and factors without end, dispersed from one extremity of 
the globe to the other. The only check to the gross abuses of 
these privileged bodies is the smuggling or contraband trade, 
which, in this point of view, may lay claim to some degree of 
utility. 

This analysis brings us to the point in question ; are the 
gains of the privileged company, national gains? Undoubtedly 
not ; for they are wholly taken from the pockets of the nation 
itself. The whole excess of value, paid by the consumer, be- 
yond the rate at which free-trade could afibrd the article, is not 
a value produced, but so much existing value presented by the 
government to the trader at the consumer's expense. It will 
probably be urged, that it must at least be admitted, that this 
profit remains and is spent at home. Granted : but by whom is 
it spent? that is the point. Should one member of a family pos- 
sess himself of the whole family income ; dress himself in fine 
clothes, and devour the best of every thing, what consolation 
would it be to the rest of the family, were he to say, what signi- 
fies it whether you or I spend the money 1 the income spent is 
the same, so it can make no difference. 

The exclusive as well as usurious profits of monopoly would 
soon glut the privileged companies with wealth, could they de- 
pend upon the good management of their concerns ; but the cu- 
pidity of agents, the long pendency of distant adventures, the 
difficulty of bringing factors abroad to account, and the incapa- 
city of those interested, are causes of ruin in constant activity. 
Long and delicate operations of commerce require superior ex- 
ertion and intelligence in the parties interested. And how can 
such qualities be expected in shareholders amounting sometimes 
to several hundreds, all of them having other matters of more 
personal importance to look after?* 

Such are the consequences of privileges granted to trading 
companies : and these consequences, it must be observed, are 
in the nature of things inseparable ; circumstances may reduce 
their efficacy, but can never remove them altogether. The 
English East India Company has met with more success than 
the three or four French ones, that at different times made the 
experiment-t This company is sovereign as well as merchant ; 
and we know by experience, that the most detestable govern- 

* The answer of La Bourdonnais to one of the directors of the French 
East India Company, who asked liow it was, that he had managed his own 
interests so much better than those of the company, will long- be remem- 
bered : " Because," said he, " I manage my own affairs according to the 

dictates of my own judgment, but am obliged to follow your instructions in 
regard to those of the company. 

+ The first French East India Company was established in the reign of 
Henry IV. A. D. 1604, at the instance of a Fleming of the name of Gerard 
Leroi. It met with no success. 



CHAP. xvH. ON PRODUCTION. 133 

ments may last for several generations : witness that of the 
Mamelukes in Egypt. 

There are some minor evils also incident to commercial pri- 
vileges. The grant of exclusive rights frequently exiles from 
a country a branch of industry and a portion of capital, that 
vi'ould readily have taken root there, but are compelled to settle 
abroad. Towards the close of the reign of Louis XIV. the 
French East India Company, being unable to support itself, 
notwithstanding its exclusive rights, transferred the exercise of 
its privileges to some speculators at St. Pfialo, in consideration 
of a small share in their profits. The trade began to revive un- 
der the influence of this comparative liberty, and would on the 
expiration of the company's charter, in 1714, have been as ac- 
tive as the then melancholy condition of France would have per- 
mitted : but the company petitioned for a renewal, and obtained 
one, pending the ventures of some private traders. Soon after- 
wards, a vessel of St. Malo, commanded by a Breton of the 
name of Lamerville, appeared upon the French coast, on its re- 
turn from the East Indies, but was refused permission to enter 
the harbour, on the plea, that it was in contravention of the com- 
pany's rights. Consequently, he was compelled to prosecute 
his voyage to the nearest port in Belgium, and carried his vessel 
into Ostend, where he disposed of the cargo. The governor of 
the Low Countries, hearing of the enormous profits he had made, 
proposed to the captain a second voyage, with a squadron to be 
fitted out for the express purpose ; and Lamerville afterwards 
performed many similar voyages for different employers, and 
laid the foundation of the Ostend Company.* 

Thus, the French consumer must necessarily have suffered 
by this monopoly : and so, in fact, he did. But at any rate, it 
will be supposed, the company must have benefited. Just the 
contrary : the company was itself ruined ; in spite of the mono- 
poly of tobacco, the lotteries, and other subsidiary grants be- 
stowed on them by the government. I " In short," says Vol- 
taire, J " all that remained to France in the East was, the regret 
of having, in the course of forty years, squandered enormous 
sums, to bolster up a company that never made a six-pence pro- 
fit, never made any dividend from the resources of its commerce, 
either to its shareholders or creditors ; and supported its estab- 
lishments in India, solely by the underhand practice of pillage 
and extortion upon the natives." 

The only case in which the establishment of an exclusive 
company is justifiable, is, when there is no other way of com- 
mencing a new trade with distant or barbarous nations. In that 

* Taylor's Letters on India. 

+ Raynal. Hist. phil. et. polit. des Establ. des Europdens, dans les deux 
Indes, liv. iv. § 19. 
t Siecle de Louis XV. 



134 ON PRODUCTION. book r. 

case, the charter is a kind of patent of invention, and confers an 
advantage, commensurate to the extraordinary risk and expense 
of the first experiment. The consumers have no reason to com- 
plain of the dearness of products, which, but for the grant of the 
charter, they would either not have enjoyed at all, or have en- 
joyed at a still dearer rate. But such grants should, like pa- 
tents, be limited to such duration only, as will repay and fully in- 
demnify the adventurers for the advances and risk incurred. Any 
thing further is a mere free gift to the company, at the expense 
of the nation at large, who have a natural right to get what they 
want wherever they can, and at the lowest possible price. 

What has been said with respect to commercial is equally ap- 
plicable to manufacturing privileges. The reason why govern- 
ments are so easily entrapped into measures of this kind is, partly 
because they see a statement of large profits, and do not trouble 
themselves to inquire whence they are derived ; and partly be- 
cause this apparent profit is easily reduced to numerical calcula- 
tion, no matter whether wrong or right, correct or incorrect ; 
whereas the loss and mischief resulting to the nation are infinite- 
ly subdivided amongst the members of the community, and ope- 
rate after all in a very indirect, complex, and general way, so as 
to escape and defy calculation. Some writers maintain arithmetic 
to be the only sure guide in political economy ; for my part, I 
see so many detestable systems built upon arithmetical state- 
ments, that I am rather inclined to regard that science as the in- 
strument of national calamity. 



SECTION IV. 

Of Regulations affecting the Corn Trade. 

It would seem that the general principles, which govern the 
commerce of all other commodities, should be equally applicable 
to the commerce of grain. But grain, or whatever else may hap- 
pen to be the staple article of human subsistence to any people, 
deserves more particular notice- 
It is universally found, that the numbers of mankind increase, 
in proportion to the supply of subsistence. The abundance and 
cheapness of provisions are favourable to the advance of popula- 
tion; their scarcity is productive of the opposite effect ;* but nei- 
ther cause operates so rapidly, as the annual succession of crops. 
The crop of one year may, perhaps, exceed or fall short of the 
usual average, by as much as 1-5 or 1-4 ; but a country, that, 
like France, has thirty millions of inhabitants one year, can not 
have thirty-six millions the next ; nor could its population be re- 

* Vide infrd. Book II. chap. 11. 



CHAP. XVII. ON PRODUCTION. 135 

duced to twenty-four millions in the space of one year, without 
the most dreadful degree of suffering. Therefore it is the ordi- 
nance of nature, that the population shall one year be super- 
abundantly supplied with subsistence, and another year be sub- 
jected to scarcity in some degree or other of intensity. 

And so, indeed, it is with all other objects of consumption ; 
but, as the most of them are not absolutely indispensable to ex- 
istence, the temporary privation of them amounts not to the ab- 
solute extinction of life. The high price of a product, which has 
wholly or partially failed at home, is a powerful stimulus to com- 
merce to import it from a greater distance and at a greater ex- 
pense. But it is unsafe to leave wholly to the providence of in- 
dividuals the care of supplying an article of such absolute neces- 
sity ; the delay of which, but for a few days, may be a national 
calamity ; the transport of which exceeds the ordinary means of 
commerce ; and whose weight and bulk would make its distant 
transport, especially by land, double or triple its avarage price. 
If the foreign supply of corn be relied upon, it may happen to be 
scarce and dear in the exporting and the importing country at the 
same moment. The government of the exporting country may 
prohibit the export, or a maritime war may interrupt the trans- 
port. But the article is one the nation can not do without; or 
even wait for a few days longer. Delay is death to a part of the 
population at the least. 

For the purpose of equalizing the average consumption to the 
average crop, each family ought literally to lay by, in years of 
plenty, for the deficiency of years of scarcity. But such provi- 
dence can not be reckoned upon in the bulk of the population. 
A great majority, to say nothing of their utter want of foresight, 
are destitute of the means of keeping such a store in reserve 
sometimes for several years together ; neither have they the ac- 
commodations for housing it, or the means of taking it along with 
them on a casual change of abode. 

Can speculative commerce be depended upon for this reserve 
against a deficiency 1 At first sight it might appear that it could, 
that self-interest would be an adequate motive; for the difference 
of the price of corn in years of abundance and those of scarcity 
is very great. But the recurrence of the oscillation is too irre- 
gular in distance of time, and too infrequent also to give rise to a 
regular traffic, or one that can be repeated at pleasure. The 
purchase of the grain, the number and size of the storehouses, 
require a very large advance of capital and a heavy arrear of in- 
terest : it is an article, that must be repeatedly shifted and turn- 
ed, and is much exposed to fraud and damage, as well as to po- 
pular violence. All these are to be covered by a profit of rare 
occurrence. Wherefore, it is possible, that the article may not 
hold out sufficient temptation to the speculator, although this 
would bo the most commendable kind of speculation, being fram- 



136 ON PRODUCTION. book i. 

ed upon the principle of buying from the producer when he is 
eager to sell, and selUng to the consumer when he finds it diffi- 
cult to purchase. 

In default of the individual providence of the consumer, and 
of speculative accumulation and reserve, neither of which it 
would seem can be safely depended upon, can the public autho- 
rity, as representing the aggregate interest, undertake the charge 
of providing against a scarcity with any prospect of success? I 
am aware, that, in a few very limited communities, blessed with 
a very economical government, like some of the Swiss cantons, 
public granaries for storing a casual surplus have answered the 
purpose well enough. But I should pronounce them impracti- 
cable in large and populous countries. The advance of capital 
and its accruing interest would affect the government in the same 
manner as private speculators, and even in a greater degree ; for 
there are few governments, that can borrow on such low terms 
as individuals in good credit. The difficulties of managing a 
commercial concern of buying, storing, and re-selling to so large 
an extent, would be still more insuperable. Turgot, in his let- 
ters on the commerce of grain, has clearly proved, that, in mat- 
ters of this kind, a government never can expect to be served at 
a reasonable rate ; all its agents having an interest in swelling 
its expenditure, and none of them i/i curtailing. It would be ut- 
terly impossible to answer for the tolerable conduct of a business 
left to the discretion of agents without any adequate control, 
whose actions are, for the most part, governed by the superior 
dignitaries of the state, who seldom have either the knowledge 
or condescension requisite for such details. A sudden panic in 
the public authorities might prematurely empty the granaries ; a 
political measure, or a war, divert their contents to quite a differ- 
ent destination. 

Generally speaking it appears that there is no safe depend- 
ence for a reserve of supply against a season of scarcity, unless 
the business be confided to the discretionary management of 
mercantile houses of the first capital, credit, and intelligence, 
willing to undertake the purchase, and the filling and replenish- 
ment of the granaries upon certain stipulated terms, and with the 
prospect of such advantages, as may fairly recompense them for 
all their trouble. The operation would then be safe and effectual, 
for the contractors would give security for due performance ; 
and it would also be cheaper executed in this way than in any 
other. Different estabUshments might be contracted with for 
the different cities of note ; and these being thus supphed in 
times of scarcity from the stores in reserve, would no longer 
drain the country of the subsistence destined to the agricultural 
population, (a) 

(a) It is singular, that after the very careful revision, which this section 
has undergone in the last edition, this paragraph should have been suffered 



CHAP. XVII. ON PRODUCTION. 137 

Public stores and granaries are after all but auxiliary and tem- 
porary expedients of supply^ The most abundant and advan- 
tageous supply will always be, that furnished by the utmost free- 
dom of commerce, whose duties in respect to grain consists 
chiefly in transporting the produce from the farm-yard to the 
principal markets, and thence in smaller quantities from the mar- 
kets of the districts where it is superabundant to those of others, 
that may be scantily supplied ; or in exporting when cheap, and 
importing when dear. 

Popular prejudice and ignorance have universally regarded 
with an evil eye those concerned in the corn-trade ; nor have 
the depositories of national authority been always exempt from 
similar illiberahty. The main charge against them is, that they 
buy up corn with the express purpose of raising its price, or at 
least of making an unreasonable advantage upon the purchase 
and resale, which is in effect so much gratuitous loss to the pro- 
ducer and consumer. 

First, I would ask, what is meant by this charge ? If it be 
meant to accuse the dealers of buying in plentiful seasons when 
corn is cheap, and laying by in reserve against seasons of scarci- 
ty, we have just seen, that this is a most beneficial operation, 
and the sole means of accommodating the supply of so preca- 
rious an article to the regularity of an unceasing demand. Large 
stores of grain laid in at a low price contribute powerfully to 
place the subsistence of the population beyond risk of failure, 
and deserve not only the protection, but the encouragement of the 
public authorities. But, if it be meant to charge the corn-deal- 
ers with buying up on a rising market and on the approach of 
scarcity, and thereby enhancing the scarcity and the price, al- 
though I admit, that this operation has not the same recommen- 
dation of utility, and that the consumer is saddled with the addi- 
tional cost of the operation without any direct equivalent benefit, 
for in this instance the deficiency of one year is not made good 
by the hoarded surplus of a preceding one, yet I can not think it 
has ever been attended with any very alarming or fatal conse- 
quences. Corn is a commodity of most extended production; 



to stand. Indeed, one would almost suspect that our author had left it ra- 
ther in compliment to the popular notions of his own country, than from 
personal conviction of the propriety of the measure he suggests ; which is 
impugned by the whole context of the remaining part of the section. The 
best security against famine is, the total absence of all official interference 
whatever, whether permanent or temporary, as the example of Great Bri- 
tain will testify. There the government has at all times abstained from 
taking a personal part in the supply either of town or country, and has 
limited its interference to them ere export and import, which have only 
been cramped and impeded by its ill-advised operations. Another import- 
ant ground of security is, the variety of the national food. Upon this our 
author has observed. Vide, infrd. T. 

26 



138 ON PRODUCTION. book i. 

and its price can not be arbitrarily raised, without disarming the 
competition of an infinity of sellers, and without an extent of 
dealing and of agency scarcely practicable to individuals. It is, 
besides, a most cumbersome and inconvenient article in compari- 
son with its price, and consequently most expensive and trouble- 
some in the carriage and warehousing. A store of any consider- 
able value can not escape observation.* And its liability to 
damage or decay often makes sales compulsory, and expose the 
larger speculators to immense loss. 

Speculative monopoly is, therefore, extremely difficult, and 
little to be dreaded. The kind of engrossment most prejudicial, 
as well as most difficult of prevention, is that practised by the 
domestic prudence of individuals in apprehension of a scarcity. 
Some, from excess of precaution, liiy by rather more than they 
want; while farmers, farming proprietors, millers and bakers, 
who habitually keep a stock on hand, take care somewhat to 
swell that stock, in the idea that they shall sell to a profit what- 
ever surplus there may be; and the infinite number of these petty 
acts of engrossment makes them greatly exceed in the aggregate 
all the united effiarts of speculation. 

But what if it should turn out after all, that even the selfish 
and odious views of such speculators are productive of some 
good? When corn is cheap, it is consumed with less providence 
and frugality, and used as food for the domestic animals. The 
distant prospect of scarcity, or even a slight rise of price, is in- 
sufficient to check this improvidence betimes. If the great hold- 
ers shut up their stores, however, the consequent anticipation of 
a rise of price immediately puts the public on their guard, and 
awakens the particular frugality and care of the little consumers, 
of whom the great mass of consumption is composed. Ingenui- 
ty is set at work to find a substitute for the scarce article of food, 
and not a particle is wasted. Thus, the avarice of one part of 
mankind operates as a salutary check upon the improvidence of 
the rest; and, when the stock withheld at length appears in the 
market, its quantity tends to lower the price in favour of the con- 
sumer. 

With regard to the tribute, which the dealer is supposed to ex- 
act from both producer and consumer, it is a charge that will 
attach with equal justice upon every branch of commerce what- 
soever. There would be some meaning in it, could products 
reach the hands of the consumer witliout any advance of capi- 
tal, without warehouses, trouble, combination, or any kind of dif- 

* Lamarre, who was a great advocate for the interference of authority in 
these matters, and was commissioned by the government, in the scarcities 
of the years 1699 — 1709, to discover all concealed hoards, and bring to light 
the monopolists, frankly confesses, that he was not able to make seizure of 
Bo much as 100 quarters altogether. Traite de la Police, Supplement au 
tome 11. 



CHAP. XVII. ON PRODUCTION. 139 

ficulty. But, so long as difficulties shall exist, nobody will be 
able to surmount them so cheaply, as those who make it their 
special business. Legislation should take an enlarged view of 
commerce in the aggregate, small and great; it will find its 
agents busied in traversing the whole surface of the territory, 
watching every fluctuation of demand and supply, adjusting the 
casual or local deficiency of price to meet the charges of pro- 
duction, and excess of price above the capacity of consumption. 
Is it to the cultivator, to the consumer, or to the public adminis- 
tration, that we can safely look for so beneficial and powerful an 
agency? Extend, if you please, the facility of intercourse, and 
particularly the capacities of internal navigation, which alone is 
suited to the transport of a commodity so cumbrous and bulky 
as grain; vigilantly watch over the personal security of the tra- 
der; and then leave him to follow his own track. Commerce 
can not make good the failure of the crop; but it can distribute 
whatever there may be to distribute, in the manner best suited to 
the wants of the community, as well as to the interests of pro- 
duction. And doubtless it was for this reason, that Smith pro- 
nounced the labour of the corn dealer to be favourable to the 
production of corn, in the next degree to that of the cultivator 
himself. 

The prevalence of erroneous views of the production and com- 
merce of articles of human subsistence have led to a world of 
mischievous and contradictory laws, regulations, and ordinances, 
in all countries, suggested by the exigency of the moment, and 
often extorted by popular importunity. The danger and odium 
thus heaped upon the dealers in grain have frequently thrown the 
business into the hands of inferior persons, qualified neither by 
information nor ability for the business ; and the usual conse- 
quence has followed; namely, that the same traffic has been 
carried on in secret, at far greater expense to the consumers; 
the dealers to whom it was abandoned being of course obliged to 
pay themselves for all the risk and inconvenience of the occupa- 
tion. 

Whenever a maximum of price has been affixed to grain, it 
has immediately been withdrawn or concealed. The next step 
was, to compel the farmers to bring their grain to market, and 
prohibit all private sales. These violations of property, with all 
their usual accompaniments of inquisitorial search, personal vio- 
lence, and injustice, have never afforded any considerable re- 
source to the government employing them. In polity as well as 
morality, the grand secret is, not to constrain the actions, but to 
awaken the inclinations of mankind. Markets are not to be 
supplied by the terror of the bayonet or the sabre.* 

* The French Minister of the Interior, in his report presented in Decem- 
ber, 1817, admits that the markets were never so ill supplied, as immedi- 
ately after the decree of May 4, 1812, prohibiting all sales out of open mar- 



140 ON PRODUCTION. book i. 

When the national government attempts to supply the popula- 
tion by becoming itself a dealer, it is sure to fail in satisfying the 
national wants itself, and at the same time to extinguish all the 
resources, that freedom of commerce would offer; for nobody 
else will knowingly embark in a losing trade, though the govern- 
ment may. 

During the scarcity prevalent throughout many parts of 
France, in the year 1775, the municipalities of Lyons, and some 
other towns attempted to relieve the wants of the inhabitants, by 
buying up corn in the country, and re-selling it at a loss in the 
towns. To defray the expense of this operation, they at the 
same time obtained an increase of the octroi, or tolls upon goods 
entering their gates. The scarcity grew worse and worse, for a 
very obvious reason; the ordinary dealers naturally abandoned 
markets, where goods were sold below the cost price, and which 
they could not resort to without moreover paying extra toll upon 
entry.* 

The more necessary an article is, the more dangerous it is to 
reduce its price below the natural level. An accidental dearness 
of corn, though doubtless a most unwelcome occurrence, is com- 
monly brought about by causes out of all human power to re- 
move, "j" There is no wisdom in heaping one calamity upon ano- 
ther, and passing bad laws because there has been a bad season. 

Governments have met with no better success in the matter 
of importation, than in the conduct of internal commerce. The 
enormous sacrifices made by the commune of Paris and the gene- 
ral government, to provision the metropolis in the winter of 
1816-17 with grain imported from abroad, did not protect the 
consumer from an exorbitant advance in the price of bread, which 

ket. The consumers crowded thither, having no where else to resort to ; 
while the farmers, being obliged to sell below the current price, pretended 
to have nothing for sale. 

* In all ages and in all places this effect will follow. The Emperor Ju- 
lian, A.D. 362, caused to be sold at Antioch 420,000 mofZii of wheat import- 
ed from Chalcis and Egypt for the purpose, at a price lower than the aver- 
age of the market ; the supplies of private commerce were immediately 
stopped in consequence, and the famine was aggravated. Vide Gibbon, c, 
24. The principles of political economy are el srnal and immutable ; but 
one nation is acquainted with them and another not. 

The metropolis of the Roman empire was always destitute of subsistence, 
when the government withheld the gratuitous largesses of grain drawn 
from a tributary world; and these very largesses were the real cause of the 
scarcity felt and complained of. 

t One of the most frequent causes of famine is, indeed, of human crea- 
tion, and that is war, which both interrupts production, and wastes exist- 
ing products. This cause is, therefore, within human control; but we can 
hardly expect it to be effectually exerted, until governments shall entertain 
more accurate notions of their owm, as well as of the national interests; 
and nations be weaned of the puerility of attaching sentiments of admira- 
tion and glory to perils encountered without necessity or reason. 



CHAP. xvii. ON PRODUCTION. 141 

was besides deficient both in weight and quality; and the supply 
was found inadequate after all.* 

On the subject of bounties on import, it is hardly necessary to 
touch. The most effectual bounty is the high price of the arti- 
cle in the country, where the scarcity occurs, amounting some- 
times to as much as 200 or 300 per cent. If this be not suffi- 
cient to tempt the importer, I know of no adequate inducement 
that the government could hold out to him. 

Nations would be less subject to famine, were they to employ 
a greater variety of aliments. When the whole population de- 
pends upon a single product for subsistence, the misery of a 
scarcity is extreme. A deficiency of corn in France is as bad 
as one of rice in Hindustan. When their diet consists of many 
articles, as butcher's meat, poultry, esculent roots, vegetables, 
fruits, fish, &c., according to local circumstances, the supply is 
less precarious; for these articles seldom fail all at a time.f 

Scarcity would also be of less frequent recurrence, if more at- 
tention were paid to the dissemination and perfection of the art 
of preserving, at a cheap rate, such kinds of food, as are offered 
in superabundance at particular seasons and places ; fish for in- 
stance ; their periodical excess might in this way be made to 
serve for times of scarcity. A perfect freedom of international 
maritime intercourse would enable the inhabitants of the tempe- 
rate latitudes to partake cheaply of those productions, that na- 
ture pours forth in such profusion under a tropical sun. J I know 

* It is mere mockery to talk of the paternal care, solicitude, or benefi- 
cence of government, which are never of any avail, either to extend the 
powers of authority, or to diminish the suffering of the people. The solici- 
tude of the government can never be doubted; a sense of intense personal 
interest will always guide it to the conservation of social order, by which it 
is siue to be the principal gainer. And its beneficence can have little me- 
rit; for it can exert none, but at the expense of its subjects. 

t Custom, the tyrant of weak minds, and of such, unfortunately, is the 
great mass of mankind, and of the lower classes in particular, is always a 
formidable opponent to the introduction of a new article of food. I have 
observed in some provinces of France, a decided distaste for the paste pre- 
pared in the Italian method, although a most nutritious substance, and well 
calculated for keeping the flour sound and good. Probably, nothing but the 
frequent recurrence of scarcity during the political agitations of the nation 
could have extended the cultivation and consumption of the potatoe, so as to 
have made it a staple article of food in many d.istricts. The appetite for 
that vegetable would be still more general, were a little more attention be- 
stowed upon preserving and ameliorating the species, and the practice of 
raising it from the seed rather than the root more strictly observed. 

t Humboldt tells us, in his Essai pol. sur la Nouvelle Espagne, c. ix,, that 
an equal area of land in that country will produce bananas, potatoes, and 
wheat, in the following proportions of weight : — 

Kilogrammes. 

Bananas 106,000 

Potatoes 2,400 

Wheat 800 

The product of bananas is, therefore, in weight, 133 times that of wheat, 



142 ON PRODUCTION. book u 

not how far it would be possible to preserve and transport the 
fruit of the banana ; but the experiment has in a great measure 
succeeded with respect to the sugar-cane, which furnishes, in a 
thousand shapes, an agreeable and wholesome article of diet, and 
is produced so abundantly by all parts of the world, lying within 
38° of latitude, that, but for our present absurd legislative provi- 
sions, it might be had much cheaper than butcher's meat, and 
for the same price as many indigenous fruits and vegetables.* 

To return to the corn-trade, I must protest against the indis- 
criminate and universal application of the arguments I have ad- 
duced to show the benefits of liberty. Nothing is more danger- 
ous in practice, than an obstinate unbending adherence to system, 
particularly in its application to the wants and errors of man- 
kind. The wiser course is, to approximate invariably to the stand- 
ard of sound and acknowledged principles, to lead towards them 
by the never-failing influence of gradual and insensible attraction. 
It is well to fix beforehand a maximum of price beyond which 
exportation of grain shall either be prohibited, or subjected to 
heavy duties ; for, as smuggling can not be prevented entirely, it 
is better that those who are resolved to practise it, should pay 
the insurance of the risk to the state, than to individuals. 

We have hitherto regarded the inflated price of grain as the 
only evil to be apprehended. But England, in 1815, was alarm- 
ed by a prospect of an opposite evil ; viz : that its price would be 
reduced too low, by the influx of foreign grain. The production 
of this article is, like that of every other, much more costly in 
England than in the neighbouring states ; owing to a variety of 
causes, which it is immaterial here to explain ; amongst others, 
chiefly to the exorbitance of her taxation. — Foreign grain could 
be sold in England at two-thirds of its cost price to the English 
grower. It, therefore, became a most important question, whe- 
ther it were better to permit the free importation, and thus, by 
exposing the home producer to a ruinous competition with the 
foreign grower, to render him incapable of paying his rent and 
taxes, to divert him from the cultivation of wheat altogether, and 

and 44 times that of potatoes. But a large deduction must be made for the. 
aqueous particles of the banana. 

A demi-hectare of fertile land in Mexico, by proper cultivation of the larger 
species of banana, may be made to feed more than 50 individuals ; vi'liereas 
the same extent of surface in Europe, supposing it to yield eight-fold, vs^ill 
give an annual product of no more than 576 kils. of wheat flour, which is 
not enough for the sustenance of two persons. It is natural that Euro- 
peans, on their first arrival in a tropical region, should be surprised at the 
very limited extent of cultivated ground, encircling the crowded cabins of 
the native population. 

* The same author informs us, that, in St. Domingo, a superficial square- 
of 3403 toises, is reckoned at an average capable of producing 10,000 lbs» 
weight of sugar ; and that the total consumption of that commodity in 
France, takmg it at the fair average of 20,000,000 kils., might be raised 
upon a superficial area of seven square leagues. 



CHAP. XVII. ON PRODUCTION. 143 

place England in a state of dependence for subsistence upon 
foreign, perhaps hostile nations ; or, by excluding foreign grain 
from her markets, to give a monopoly to the home producer at 
the expense of the consumer, thereby augmenting the difficulty 
of subsistence to the labouring classes, and, by the advanced 
price of the necessaries of life, indirectly raising that of all the 
manufactured produce of the country, and proportionately dis- 
abling it to sustain the competition of other nations. 

This great question has given rise to the most animated con- 
test both of the tongue and the pen; and the obstinate conten- 
tion of two parties, each of which had much of justice on its side, 
leaves the by-standers to infer, that neither has chosen to notice 
the grand cause of mischief; that is to say, the necessity of sup- 
porting the arrogant pretensions of England to universal influence 
and dominion, by sacrifices out of all proportion to her territorial 
extent. At all events, the great acuteness and intelligence, dis- 
played by the combatants on either side, have thrown new light 
upon the interference of authority in the business of the supply 
of grain, and have tended to strengthen the conclusion in favour 
of commercial liberty. 

The substance of the argument of the prohibitionists may be 
reduced to this ; that it is expedient to encourage domestic agri- 
culture, even at the expense of the consumer, to avoid the risk 
of starvation by external means ; which is seriously to be appre- 
hended on two occasions in particular ; first, when the power of 
influence of a belligerent is able to intercept or check the import, 
which might become necessary; secondly, when the corn growing 
countries themselves experience a scarcity, and are obliged to re- 
tain the whole of their crops for their own subsistence.* 

It was replied by the partisans of free-trade, that, if England 
were to become a regular and constant importer of grain, not 
one, but many foreign countries would grow into a habit of sup- 
plying her : the raising of corn for her market in Poland, Spain, 
Barbary, and North America, would be more extensively prac- 
tised, and the sale of their produce would become equally indis- 
pensable to them, as the purchase would be to England : that 
even Buonaparte, the most bitter enemy England had ever en- 
countered, had taken her money for the license to export corn : 
that crops never fail at the same time all over the world : and that 
an extensive commerce in grain would lead to the formation of 
large stores and depots, which will offer the best possible security 
against the recurrence of scarcity; and that, accordingly, as they 
asserted, there are no countries less subject to that calamity, or 
even to violent fluctuations of price, than those that grow no corn 
at all ; for which they cited the example of Holland, and other 
nations similarly circumstanced. "f 

* Malthus. Inquiry into the Nature and Progress of Rent. Grounds of 
an Opinion, &c. on Foreign Corn. 

t Eicardo. Essay on the Influence of the Low Price cf Corn, &c. 



144 ON PRODUCTION. book i. 

However, it can not be disputed that, even in countries best 
able to reckon on commercial supply, there are many serious in- 
conveniences to be apprehended from the ruin of internal tillage. 
Subsistence is the primary want of a nation, and it is neither 
prudent nor safe to become dependent upon distant supply. Ad- 
mitting that laws, which, for the protection of the agricultural, 
prohibit the import of grain to the prejudice of the manufacturing 
interest, are both unjust and impolitic, it should be recollected 
that, on the other hand, excessive taxation, loans, overgrown es- 
tablishments, civil, military, or diplomatic, are equally impolitic 
and unjust, and fail more heavily upon agriculture than upon ma- 
nufacture. Perhaps one abuse may make another necessary, to 
restore the equilibrium of production, otherwise industry would 
abandon one branch, and take exclusively to another, to the evi- 
dent peril of the existence of society. 



CHAPTER XVIII. 



op THE EFFECT UPON NATIONAL WEALTH, RESULTING FROM THE 
PRODUCTIVE EFFORTS OP PUBLIC AUTHORITY. 

There can be no production of new value, consequently no 
increase of wealth, where the product of a productive concern 
does not exceed the charge of production.* Thus, whether 
government or individuals be the adventurers in the losing con- 
cern, it is equally ruinous to the nation, and there is so much 
less value in the country. 

It is of no avail to pretend, that, although the government be 
a loser, its agents, the industrious people, or the workmen it em- 
ploys, have made a profit. If the concern can not support itself 
and pay its own way, the receipt must fall short of the outlay, 
and the difference fall upon those," who supply the expenditure of 
the state ; that is to say, the tax-payers. "j" 

The manufacture of Gobelin tapestry, carried on by the go- 
vernment of France, consumes a large quantity of wool, silk, 
and dyeing-drugs ; furthermore, it consumes the rent of the 

* It must not be forgotten, that the consumption of the value of the pro- 
ductive agency, exerted in the course of production, is quite as real as that 
of the raw material. And under this term, productive agency, I comprise 
that of capital as well as of human beings. 

t This is equally true, when the government speculates with its own 
private or peculiar funds, as with the produce of the national lands; for 
whatever is thus expended might have gone towards alleviating the public 
burthens. 



CHAP. XVIII. ON PRODUCTION. 145 

ground and buildings, as -well as the wages of workmen em- 
ployed ; all which should be reimbursed by the product, which 
they are very far from being. This establishment, instead of a 
source of wealth to the nation at large, for the government is 
fully aware of the loss to itself, is, on the contrary, a source of 
perpetual impoverishment. The annual loss to the nation is the 
whole excess of the annual consumption of the concern, including 
wages, which are one item of consumption, above the annual 
product. The same may be said of the manufacture of porcelain 
at Sevres, and I fear of all manufacturing concerns carried on 
upon account of governments. 

We are told, that this is a necessary sacrifice ; that otherwise 
the sovereign would be unprovided with objects of royal bounty 
and of royal splendour. This is no place to inquire, how far the 
munificence of the monarch and the splendour of his palaces con- 
tribute to the good government of the people. I take for granted 
that these things are necessary; yet, admitting them to be so, 
there is no reason why the national sacrifices, requisite to sup- 
port this magnificence and liberality, should be aggravated by the 
losses incurred by a misdirection of the public means. A nation 
had much better buy outright what it thinks proper to bestow ; it 
would probably obtain for less money an object full as precious ; 
for individuals can always undersell the government.* 

There is a further evil attending the productive efforts of the 
government ; they counteract the individual industry, not of 
those it deals with, for they take good care to be no losers, but 
of its competitors in production. The state is too formidable a 
rival in agriculture, manufacture and commerce ; it has too much 
wealth and power at command, and too little care of its own in- 
terest. It can submit to the loss of selling below prime cost ; it 
can consume, produce, or monopolize in very little time so large 
a quantity of products, as violently to derange the relative prices 
of commodities : and every violent fluctuation of price is calamit- 
ous. The producer calculates upon the probable value of his 
product when ready for market ; nothing discourages him so 
much, as a fluctuation that defies all calculation. The loss he 
suffers is equally unmerited, as the accidental gains that may be 
thrown into his hands. His unmerited gains, if any there be, are 
so much extra charge upon the consumer. 

There are some concerns, I know, which the government must 

* The same may be observed of commercial enterprises undertaken by 
the public authority. During the scarcity of 1816-17, the French govern- 
ment bought up corn in foreign markets ; the price of corn rose to an exor- 
bitant rate in the home market, and the government resold at a very high 
rate, although somewhat below the average of the market. Individual 
traders w^ould have found this a very profitable venture ; but the govern- 
ment vras out of pocket 21 millions of francs and upwards. Rapport au Roi 
du 24 Dec. 1818. 

27 



146 ON PRODUCTION. book i. 

of necessity keep in its own hands. The building of ships of war 
can not safely be left to individuals ; nor, perhaps, the manufac- 
ture of gunpowder. However, in France, cannon, muskets, cais- 
sons, and tumbrils are bought of private makers, and seemingly 
with benefit. Perhaps the same system might be further extend- 
ed. A government must act by deputy, by the intermediate 
agency of a set of people, whose interest is in direct opposition 
to its own ; and they will of course attend to their own in prefer- 
ence. If it be so circumstanced as to be invariably cheated in 
its bargains, there is no need to multiply the opportunities of 
fraud, by engaging itself in production and adventure ; that is to 
say, embarking in concerns, that must infinitely muUiply the oc- 
casions of bargaining with individuals. 

But, although the public can scarcely be itself a successful 
producer ; it can at any rate give a powerful stimulus to indivi- 
dual productive energy, by well-planned, well-conducted, and 
well-supported public works, particularly roads, canals, and har- 
bours. 

Facility of communication assists production, exactly in the 
same way as the machinery, that multiplies manufactured pro- 
ducts, and abridges the labour of production. It is a means of 
furnishing the same product at less expense, which has exactly 
the same effect, as raising a greater product with the same ex- 
pense. If we take into account the immense quantity of goods 
conveyed upon the roads of a rich and populous empire, from 
the commonest vegetables brought daily to market, up to the 
rarest imported luxuries poured into its harbours from every part 
of the globe, and thence diffused, by means of land-carriage, 
over the whole face of the territory, we shall readily perceive the 
inestimable economy of good roads in the charges of production. 
The saving in carriage amounts to the whole value the article 
has derived gratuitously from nature, if, without good roads, it 
could not be had at all. Were it possible to transplant from the 
mountain to the plain the beautiful forests that flourish and rot 
neglected upon tbe inaccessible sides of the Alps and Pyrenees, 
the value of these forests would be an entirely new creation of 
value to mankind, a clear gain of revenue both to the landholder 
and the consumer also. 

Academies, libraries, public schools, and museums, founded 
by enlightened governments, contribute to the creation of wealth, 
by the further discovery of truth, and the diffusion of what was 
known before ; thus empowering the superior agents and direct- 
ors of production, to extend the application of human science to 
the si^pply of human wants.* So likewise of travels, or voyages 
of discovery, undertaken at the public charge ; the consequences 
of which have of late years been rendered particularly brilliant, 

* Supra, Chap. 6. 



CHAP. XVIII. ON PRODUCTION. 147 

by the extraordinary merit of those, who have devoted themselves 
to such pursuits. 

It is observable too, that the sacrifices made for the enlarge- 
ment of human knowledge, or merely for its conservation, should 
not be reprobated, though directed to objects of no immediate or 
apparent utility. The sciences have an universal chain of con- 
nexion. One which seems purely speculative must advance a 
step, before another of great and obvious practical utility can be 
promoted. Besides, it is impossible to say vhat useful proper- 
ties may lie dormant in an object of mere cuiiosity. When the 
Dutchmaa Otto Guent;ke struck out the first sparks of electri- 
city, who would have supposed they would have enabled Frank- 
lin to direct the lightning, and divert it from our edifices, an ex- 
ploit apparently so far beyond the powers of man t 

But of all the means, by which a government can stimulate 
production, there is none so powerful as the perfect security of 
person and property, especially from the aggressions of arbi- 
trary power.* This security is of itself a source of public pros- 
perity, that more than counteracts all the restrictions hitherto 
invented for checking its progress. Restrictions compress the 
elasticity of production : but w-ant of security destroys it alto- 
gether, (a) To convince ourselves of this fact, it is sulficient 
to compare the nations of western Europe, with those subject to 
the Ottoman power. Look at most parts of Africa, Arabia, Per- 
sia, and Asia Minor, once so thickly strown with flourishing 
cities, whereof, as Montesquieu remarks, no trace now remains 
but in the pages of Strabo. The inhabitants are pillaged alike 
by bandits and pashas ; wealth and population have vanished ; 
and the thinly scattered remnant are miserable objects of want 

* Smith in his recapitulation of the real causes of the prosperity of Great 
Britain, places at the head of the list, ' That equal and impartial adminis- 
tration of justice, which renders the rights of the meanest British subject 
respectable to the greatest ; and which, by securing to every man the fruits 
of his own industry, gives the greatest and most effectual encouragement 
to every sort of industry.' Wealth of Nations, b. iv. c. 7. Poivre, who 
was a great traveller, tells us, that he never saw a country really prosper, 
ous, which did not enjoy the freedom of industry, as well as security of per- 
son and property. 



(a) This security is in fact the main duty of all government. Were it 
not for the imperfections of human nature, — the propensity of mankind to 
vice, society might exist without government, for no man would injure an- 
other. It is to protect one against the vices of another, that the forms and 
institutions of society are established or supported; thus arming individual 
right with the aggregate of social strength. But the same moral imperfec- 
tions, which drive mankind into the bonds of society, undermine and vitiate 
its institutions. The very engine erected to protect, is directed to the in- 
jury and spoliation of individuals, and becomes occasionally more danger- 
ous than individual wrong. T. 



148 ON PRODUCTION. book i. 

and wretchedness. Survey Europe on the other hand ; and 
though she is still far short of the prosperity she might attain, 
most of her kingdoms are in a thriving condition, in spite of 
taxes and restrictions innumerable ; for the simple reason, that 
person and property are there pretty generally safe from violence 
and arbitrary exaction. 

There is one expedient, by which a government may give its 
subjects a momentary accession of wealth, that I have hitherto 
omitted to mention. I mean the robbery from another nation 
of all its moveable property, and bringing home the spoil, or the 
imposition of enormous tributes upon its growing produce. This 
was the mode practised by the Romans in the later periods of the 
republic, and under the earliest emperors. This is an expedient 
of the same nature, as the acquirement of wealth by individual 
acts of illegal violence or fraud. There is no actual production, 
but a mere appropriation of the products of others. I mention 
this method of acquiring wealth, once for all, without meaning 
to recommend it as either safe or honourable. Had the Romans 
followed the contrary system with equal perseverance, had they 
studied to spread civilization among their savage neighbours, 
and to establish a friendly intercourse that might have engender- 
ed reciprocal wants, the Roman power would probably have ex- 
isted to this day. 



CHAFTEK, XIX, 



OF COLONIES AND THEm PRODUCTS. 

Colonies are settlements formed in distant countries by an el- 
der nation, called the mother country. When the latter wishes 
to enlarge its intercourse with a country, already populous and ci- 
viUzed, whose territory it has, therefore, no hopes of getting into 
its own possession, it commonly contents itself with the estab- 
lishment of a factory or mercantile residence, where its factors 
may trade, in conformity with the local regulations ; as the Euro- 
peans have done in China and Japan. When colonies shake off 
their dependence upon the mother country, they become substan- 
tive and independent states. 

It is common for nations to colonize, when their population 
becomes crowded in its ancient territorial hmits; and when par- 
ticular classes of society are exposed to the persecution of the 
rest. These appear to have been the only motives for coloni- 
zation among the ancients ; the moderns have been actuated by 
other views. The vast improvements in navigation have open- 



CHAP. XIX. ON PRODUCTION. 149 

ed new channels to their enterprise, and discovered countries 
before unknown; they have found their way to another hemis- 
phere, and to the most inhospitable climates, not with the inten- 
tion of there fixing themselves and their posterity, but to obtain 
valuable articles of commerce, and return to their native coun- 
tries, enriched with the fruits of a forced, but yet very extensive 
production. 

It is worth while to note this difference of motive, which has 
made so marked a difference in the consequences of the two sys- 
tems of colonization. I am strongly tempted to call one ^:he co- 
lonial system of the ancients, and the other, the colonial system 
of the moderns ; although there have been many colonies in mo- 
dern times established on the ancient plan, of which those of 
North America are the most distinguished, {a) 

The production of colonies, formed upon the ancient system, 
is inconsiderable at the commencement; but increases with 
great rapidity. The colonists choose for their country of adop- 
tion a spot, where the soil is fertile, the climate genial, or the 
position advantageous for commercial purposes. The land is 
generally quite fresh, whether it have been the scene of a dense 
population long since extinguished, or merely the range of rov- 
ing tribes, too small in number and strength to exhaust the pro- 
ductive qualities of the soil. 

Families, transplanted from a civilized to an entirely new 
country, carry with them theoretical and practical knowledge, 
which is one of the chief elements of productive industry : they 
carry likev/ise habits of industry, calculated to set these elements 
in activity, as well as the habit of subordination, so essential to 
the preservation of social order; they commonly take with them 
some little capital also, not in money, but in tools and stock of 
kifferent kinds : moreover, they have no landlord to share the 
produce of a virgin soil, far exceeding in extent what they are 
able to bring into cultivation for years to come. To these causes 
of rapid prosperity, should, perhaps, be superadded the chief 
cause of all, the natural desire of mankind to better their condi- 
tion, and to render as comfortable as possible the mode of life 
they have adopted. 

The rapid increase of products in colonies, founded upon this 
plan would have been still more striking, if the colonists had car- 



(a) The distinction of the two systems is more imaginary than real. Most 
of the early establishments of the Europeans in the West were made with 
the view oi^ absolute migration. The French at St. Domingo, the English 
at Barbadoes, the Spaniards almost universally, settled without the inten- 
tion of returning home. The introduction of negro labour was an after- 
thought. Slavery was an established practice in all the ancient world; and 
colonies either made prize of the indigenes, or imported slaves from abroad, 
as soon as they were rich enough to buy them. T. 



150 ON PRODUCTION. book i. 

ried with them a larger capital; but, as we have already observ- 
ed, it is not thefamilies favoured by fortune that emigrate ; those, 
who have the command of a sufficient capital to procure a com- 
fortable existence in their native country, the scene of their hal- 
cyon days of infancy, will rarely be tempted to renounce habits, 
friends, and relations, to embark in what must always be attend- 
ed with hazard, and encounter the inseparable hardships of a pri- 
mitive establishment. This accounts for the scarcity of capital 
in newly-settled colonies; and is one reason why it bears so 
hieh a rate of interest there. 

In point of fact, capital is of much more rapid accumulation m 
new colonies, than in countries long civilized. It would seem as 
if the colonists, in abandoning their native country, leave behind 
them part of their vicious propensities ; they certainly carry with 
them little of thai fondness lor show, that costs so dear in Eu 
rope, and brings so poor a return. No qualities, but those of 
utility, are in estimation in the country they are going to ; and 
consumption is limited to objects of rational desire, which is 
sooner satisfied than artificial wants. The towns are few and 
small; the life of agriculturists, which they must necessarily 
adopt, is of all others the most economical ; finally, their indus- 
try is proportionately more productive, and requires a smaller 
capital to work upon. 

The character of the colonial government usually accords with 
that of individuals; it is active in the execution of its duties, 
sparing of expense, and careful to avoid quarrels ; thus there are 
few taxes, sometimes none at all: and, since the government takes 
little or nothing from the revenues of the subject, his abihty to 
multiply his savings, and consequently to enlarge his productive 
capital, is very great. With very little capital to begin upon, the 
annual produce of the colony very soon exceeds its consump- 
tion. Hence, the astonishingly rapid progress in its wealth and 
population; for human labour becomes dear in proportion to the 
accumulation of capital; and it is a well-known maxim, that po- 
pulation always increases according to the demand.* 

With these data, there is no difficulty in explaining the causes 
of the rapid advance of such colonies. Among the ancients we 
find, that Ephesus and Miletus in Asia Minor, Tarentum and 
Crotona in Italy, Syracuse and Agrigentum in Sicily, very soon 
surpassed the parent cities in wealth and consequence. The 
English colonies in North America, which bear the closest re- 
semblance of any in our times to those of ancient Greece, pre- 
sents a picture of prosperity less striking perhaps, but quite as 
deserving of notice, and still in the attitude of advance. 

It is the invariable practice of colonies, founded upon this 
plan, and without any thoughts of returning home, to provide 

* Vide infra, under the head of Population, Book II, c. 11. 



CHAP. XIX. ON PRODUCTION. 151 

themselves an independent government; and, even where the 
mother-country reserves the right of legislation, that right will 
sooner or later be dissolved by the operation of natural causes, 
and matters be brought to that footing, on which justice and re- 
gard to its real interest should have prompted her to put them 
originally. 

But, to proceed to the colonies formed upon the colonial sys- 
tem of the moderns; the founders of them were for the most 
part adventurers, whose object was, not to settle in an adopted 
country, but rapidly to amass a fortune, and return to enjoy it in 
their former homes.* 

The early adventurers of this stamp found ample gratification 
of their extravagant rapacity, first in the cluster of the Antilles, 
in Mexico and Peru, and subsequently in Brazil and in the East- 
ern Indies. After exhausting the resources previously accumu- 
lated by the aborigines, they were compelled to direct their in- 
dustry towards discovering the mines of these new countries, and 
to turn to account the no less valuable produce of their agricul- 
ture. Successive swarms of new colonists poured in from time 
to time, animated for the most part with some hope of return, 
with the desire, not of living in affluence upon the land they cul- 
tivated, and leaving behind them a contented posterity and a 
spotless name, but of making inordinate gain to be afterwards 
enjoyed elsewhere: this motive led them to adopt a system of 
compulsory cultivation, of which negro slavery was the principal 
instrument. 

But let me ask, in what manner does slavery operate upon 
production? Is the labour of the slave less costly, than that of 
the free labourer? This is an important inquiry, originating in 
the influence of the modern system of colonization upon the mul- 
tiplication of wealth. 

Stewart, Turgot, and Smith, all agree in thinking, that the la- 
bour of the slave is dearer and less productive than that of the 
freeman. — Their arguments amount to this: a man, that neither 
works nor consumes on his own account, works as little and 
consumes as much as he can: he has no interest in the exertion 
of that degree of care and intelligence, which alone can ensure 
success: his life is shortened by excessive labour, and his mas- 
ter must replace it at great expense : besides, the free workman 
looks after his own support; but that of the slave must be attend- 
ed to by the master; and, it is impossible for the master to do it 
so economically as the free workman, the labour of the slave 
must cost him dearer. | 

* There have been many exceptions in North America and elsewhere. 
The colonies of Spain and Portugal in the New World were of an ambigu- 
ous character. Some of the colonists contemplated a return : others went 
to establish themselves and their posterity ; but the whole plan of them has 
been subverted, since the commencement of the struggle for emancipation. 

+ Stewart (Sir Jas.) Inquiry into the Prin. of Pol. Econ. book ii. c. 607. 



152 ON PRODUCTION. book i. 

This position has been controverted by the following calcula- 
tion: — The annual expense of a negro in the West Indies, upon 
the plantations most humanely administered, does not exceed 
300 /r.: add the interest of his prime cost, say at ten per cent., 
for it is a life interest ; the average price of a negro is about 
2000 /r., so that, allowing 200 fr. for the annual interest, the 
whole expense of a negro to his owner is but 500 /r. per an- 
num, (fl) a sum doubtless much inferior to the charge of free la- 
bour in that part of the world. An ordinary free labourer may 
earn there 5, 6, '7 fr. per day, or even more. Taking the me- 
dium of 6/r., and reckoning but 300 working days in the year, 
the annual wages will amount to 1800 /r. instead of 500.* 

Common sense will tell us, that the consumption of a slave 
must be less than that of a free workman. The master cares 
not if his slave enjoy life, provided he do but live ; a pair of 
trowsers and a jacket are the whole wardrobe of the negro : his 
lodging a bare hut, and his food the manioc root, to Avhich kind 
masters now and then add a little dried fish. A population of 
free workmen, taken one with another, has women, children, 
and invalids to support : the ties of consanguinity, friendship, 
love, and gratitude, all contribute to multiply consumption; 
whereas, the slave owner is often relieved by the effects of fa- 
tigue from the maintenance of the veteran : the tender age and 
sex enjoy little exemption from labour; and even the soft im- 
pulse of sexual attraction is subject to the avaricious calculations 
of the master. 

What is the motive, which operates in every man's breast to 
counteract the impulse towards the gratification of his wants 
and appetites'? Doubtless, the providental care of the future. 
Human wants and appetites have a tendency to extend, — frugal- 
ity to reduce consumption; and it is easy to conceive, that these 
opposite motives, working in the mind of the same individual, 
help to counteract each other. But, where there is master and 

Turgot. Reflections sur la Formation et la Distrihution des Ridiesses, § 23. 
Smith. Wealth of Nations, book i. c. 8. book iii. c. 2. 

* It should be observed here, that the free labourers, who are so much 
better paid, are commonl}'- engaged in occupations, which, though less la- 
borious, require a greater degree of intelligence and personal skill. Tailors 
and watchmakers are generally free men. And the mere existence of slave- 
ry of itself enhances the price of free field-labour, by driving all competition 
out of the market. 



(a) In this calculation no account has been taken of the housing of the 
negro, the tools and implements supplied to him, or the clothing furnished 
by the master ; neither does our aiithor seem to make any allowance for the 
probable increase of agricultural production, which free negro labour might 
afford. Free European labour would doubtless be far more expensive, were 
It practicable. The interest of money is also estimated far too low, and the 
infant and the aged must be provided for by the master. T. 



CHAP. XIX. ON PRODUCTION. 153 

slave, the balance must needs incline to the side of frugality ; 
the wants and appetites operate upon the weaker party, and the 
motive of frugality upon the stronger. It is a well known fact, 
that the net produce of an estate in St. Domingo cleared off the 
whole purchase-money in six years; whereas in Europe the net 
produce seldom exceeds the -^-g or ^V of the purchase money, 
and sometimes falls far short even of that. Smiih himself else- 
where tells us that the planters of the^ English islands admit that 
the rum and molasses vv'ill defray the whole expenses of a sugar 
plantation, leaving the total produce of sugar as net proceeds: 
which, as he justly observes, is much the same as if our farmers 
were to pay their rent and expenses with the straw only, and to 
make a clear profit of all the grain. Now I ask, how many pro- 
ducts are there, that exceed the expenses of production in the 
same degree? (a) 

Indeed, this very exorbitance of profit shows, that the indus- 
try of the master is paid out of all proportion with that of the 
slave. To the consumer it makes no difference. One of the 
productive classes benefits by the depression of the rest; and 
that would be all, were it not that the vicious system of produc- 
tion, resulting from this derangement, opposes the introduction 
of a better plan of industry. The slave and the master are both 
degraded beings, incapable of approximating to the perfection of 
industry, and by their contagion, degrading the industry of the 
free man, who has no slaves at his command. For labour can 
never be honourable, or even respectable, where it is executed 
by an inferior cast. The forced and unnatural superiority of the 
master over the slave is exhibited in the affectation of lordly in- 
dolence and inactivity : and the faculties of mind are debased in 
equal degree; the place of intelligence is usurped by violence 
and brutality. 

I have been told by travellers of veracity and observation, that 
they consider all progress in the arts in Brazil and other settle- 
ments of America as utterly hopeless, while slavery shall conti- 
nue to be tolerated. Those states of the North American Union, 
which have proscribed slavery, are making the largest strides to- 
wards national prosperity. The inhabitants of the slave states 
of Georgia and CaroUna raise the best cotton in the world, but 
can not work it up. During the last war with England, they 
were obliged to send it overland to New York to be spun into 



(a) What reference can this inequality have to the relative position of 
the proprietor and the different productive agents one to another ? It is a 
mere question of difference of interest of capital. Capital in the West In- 
dies brings a return very different, in its ratio to rent or the profit of land, 
from what it yields in Europe. Land, the source of production, sells ciieap, 
because of the greater unhealthiness of climate, insecurity of tenure, abun- 
dance, &c. &c. T. 

28 



154 ON PRODUCTION. book i. 

yarn. The same cotton is sent back at a vast expense to be con- 
consumed at the place of its original growth in a manufactured 
state, (a) This is a just retribution for the toleration of a prac- 
tice, by which one part of mankind is made to labour, and sub- 
jected to the severest privation, for the benefit of another. Po- 
licy is in this point in accordance with humanity, {b) 

It remains yet to be explained, what are the consequences of 
the commercial intercourse between the colony and the mother 
country, in regard to production; always taking it for grant- 
ed, that the colony continues in a state of dependence, for the 
moment it shakes off the yoke, it has nothing colonial but its 
origin, and stands in relation to the mother-country, on exactly 
the same footing as any other nation on the globe. 

The parent-state, with a view to secure to the produce of its 
own soil and industry the market of colonial consumption, gene- 
rally prohibits the colonist from purchasing European commodi- 
ties from any one else, which enables her own merchants to sell 
their goods in the colony for somewhat more than they are cur- 
rently worth. This is a benefit conferred on the subjects of the 
parent-state at the expense of the colonists, who are likewise its 
subjects. Considering the mother-country and the colony to be 
integral parts of one and the same state, the profit and loss ba- 
lance each other; and this restriction is nugatory, except inas- 
much as it entails the charge of an establishment of custom or 
excise-officers; and thus increases the national expenditure. 

While, on the one hand, the colonists are obhged to buy of 
the mother-country, they are, on the other, compelled to sell 
their colonial produce exclusively to its merchants, who thus ob- 
tain an extra advantage without any creation of value, at the ex- 
pense, likewise, of the colonists, by the enjoyment of an exclu- 
sive privilege, and of exemption from competition. Here, too, the 
profit and loss destroy each other nationally, but not individually; 
what a merchant of Havre or Bourdeaux gains in this way is 
substantial profit; but it is taken from the pockets of one or 



(a) So it is now from Hindustan, where labour is free and most abundant. 
Cotton will flow towards machinery, which has become too powerful for the 
competition of human labour, even where it is the cheapest. That is, there- 
fore, not the effect of the toleration of slavery in those states. T. 

(6) Therefore our author has come to this correct conclusion, his reason- 
ing is neither logical nor satisfactory ; indeed, the whole of this important 
subject is dismissed with a precipitation little suited to its importance. 
There are two niotives of human industry, the hope of enjoyment, and the 
fear of suffering. The slave is actuated principally by the latter, the free 
agent by the former. Neither of these motives should have been thus cur- 
sorily adverted to, in the analysis of actual production, but have been fair- 
ly set forth in the outset, immediately after the detail of the sources of pro- 
duction; being both of them the stimuli, which give activity to those 
sources. After all that our author and others have done, much yetxeraains 
for the organization of the science. T. 



CHAP. XIX. ON PRODUCTION. 155 

more subjects of the same state, who had equal right to have 
their interests attended to. It is true, indeed, that the colonists 
are indemnified in another way ; viz. either by the miseries of the 
slave population, as we have already explained; or by the priva- 
tions of the inhabitants of the mother-country, as I am about to 
show. 

So completely is the whole system built upon compulsion, re- 
striction, and monopoly, that these very domestic consumers are 
compelled to buy what colonial articles of consumption they re- 
quire exclusively from the national colonies ; every other colony, 
and all the rest of the world, being denied the liberty of import- 
ing colonial* produce, or subjected to the payment of a heavy 
fine, in the shape of an import duty. 

It would seem, that the home-consumer should at any rate de- 
rive an obvious benefit, in the price of colonial produce, from his 
exclusive right of purchasing of the colonist. But even this un- 
just preference is denied him; for, as soon as the produce ar- 
rives in Europe, the home-merchant is allowed to re-export and 
sell it where he chooses, and particularly to those nations, that 
have no colonies of their own; so that after all the planter is de- 
prived of the competition of buyers, although the home-consum- 
er is made to suffer its full effect. 

All these losses fall chiefly upon the class of home-consumers, 
a class of all others the most important in point of number, and 
deserving of attention on account of the wide diff'usion of the 
evils of any vicious system affecting it, as well as the functions 
it performs in every part of the social machine, and the taxes it 
contributes to the public purse, wherein consists the power of 
the government. They may be divided into two parts ; whereof 
the on© is absorbed in the superfluous charges of raising the co- 
lonial produce, which might be got cheaper elsewhere ;"}" this is 
a dead loss to the consumer, without gain to any body. The 
other part, which is also paid by the consumer, goes to make 
the fortunes of West-Indian planters and merchants. The wealth 

* Or equinoctial; the term is applied to the ordinary products of equi- 
noctial latitudes. 

t Poivre, a writer of great information and probity, assures us, that white 
sugar of the best quality is sold in Cochin China, at the rate of 3 piastres 
or 16/r. of our money per quintal of the country, which is equal to 150 livr. 
poids de marc, little more than 2 sows per livr.; and that moi-e than 80 mil- 
lions of livr. are thence exported annually to China at that rate. Adding 
300 per cent, for the charges and profits of trade, which is a most liberal 
allowance, the sugar of Cochin China might, under a free trade, be sold in 
France at from 8 to 9 sous per livr. 

The English already derive from Asia a considerable quantity both of 
sugar and indigo, at a cheaper rate than those of the West Indies. And, 
doubtless, if the Europeans were to plant independent and industrious co- 
lonies along the northern coast of Africa, the culture of equinoctial products 
there would rapidly gain ground, and supply Europe in greater abundance 
at a still cheaper rate. 



156 ON PRODUCTION. book j. 

thus acquired is the produce of a real tax upon the people, al- 
though, being centred in few hands, it is apt to dazzle the eyes, 
and be mistaken for wealth of colonial and commercial acquisition. 
And it is for the protection of this imaginary advantage, that al- 
most all the wars of the 18th century have been undertaken, and 
that the European states have thought tliemselves obhged to 
keep up, at a vast expense, civil and judicial, as well as marine 
and military, establishments, at the opposite extremities of the 
globe.* 

When Poivre was appointed governor of the Isle of France, 
the colony had not been planted more than 50 years; yet he cal- 
culated it to have then cost France no less than 60 millions of 
fr.\ to be a source of regular and large out-going; and to bring 
her no return of any kind whatsoever. "f" It is true, that the mo- 
ney spent on the defence of that settlement had the further ob- 
ject of upholding our other possessions in the East Indies; but, 
when we find that, these latter were still more expensive both to 
the government and to the proprietors of the two companies, old 
and new, it is impossible to deny, that all we gained by keeping 
the Mauritius at this enormous expense was, the opportunity of 
a further waste in Bengal and on the coast of Coromandel. 

The same observations will apply to such of our possessions 
in other parts of the world, as were of no importance, but in a 
military point of view. Should it be pretended, that these sta- 
tions are kept up at a great sacrifice, not with the object of gain, 
but to extend and affirm the power of the mother-country, it 
might yet be asked, why maintain them at such loss, since this 
power has no other object but the preservation of the colonies, 
which turn out to be themselves a losing concern? J 

That England has benefited immensely by the loss of her 
North American colonies, is a fact no one has attempted to 
deny.§ Yet she spent the incredible sum of 1,800,000,000 /r., 

* Arthur Young, in 1789, estimated the annual charge entailed on France, 
by the possession of St. Domingo, at 48 millions o? francs. He has gone 
into detail to prove, that, if the sums spent on her colonies for 25 years 
only had been devoted to the improvement of any one of her own provinces, 
she would have acquired an annual additional of 120 millions of francs, net 
revenxre, consisting of actual products, without loss to any body. Vide his 
Journey in France. 

t (Euvres de Poivre, p. 209. In this estimate he takes no account of the 
charge of the military and marine establishment of France herself, of which 
a part should be set down to the colony. 

t Vide the works of Benjamin Franklin, vol. ii. p. 50, for the opinion of 
that celebrated man, who had so much experience in these matters. I find 
it stated in the Travels of Lord Valentia, that the Cape of Good Hope, in 
1802, cost England an access of from six to seven millions of /mncs per an- 
num above its own revenue. 

§ " Bristol was one of the chief entrepots of North American commerce. 
Her principal merchants and inhabitants joined in a most energetic repre- 
sentation to parliament, that their city would be infallibly ruined, by the 
acknowledgment of American Independence ; adding, that their port would 



eHAP. XIX. ON PRODUCTION. 157 

in attempting to retain possession; a monstrous error in policy 
indeed ; for she might have enjoyed the same benefits, that is 
to say, have emancipated her colonies, without expending a six- 
pence; besides saving a profusion of gallant blood, and gaining 
credit for generosity, in the eyes of Europe and of posterity.* 

The blunders committed by the ministers of George III., 
during the whole course of the first American war, in which, 
indeed, they were unhappily abetted, by the corruption of the par- 
liament and the pride of the nation, were imitated by Napoleon, 
in his attempt to reduce the revolted negroes of St. Domingo. 
Nothing but its distance and maritime position prevented that 
scheme from proving equally disastrous with the war of Spain. 
Yet, comparatively, the independence of that fine island might 
have been made equally productive of commercial benefit to 
France, as that of America had been to England. | It is high 

be so deserted, as not to be wortb the charge of keeping- up. Notwithstand- 
ing their representations, peace became a matter of necessity, and the dread- 
ed separation was consented to. Ten years had scarcely elapsed after this 
event, when the same worthy persons petitioned tlie parliament, for leave 
to enlarge and deepen the port, which, instead of being deserted, as they 
had apprehended, was incapable of receiving the influx of additional ship- 
ping, that the commerce of independent America had given birth to." De 
Levis, Lettres Chinoises. 

* These remarks are not altogether applicable to the British dependen- 
cies in the East ; because there the nation is rather a conqueror than a co- 
lonist, having the domination over thirty-two millions of inhabitants, and 
the absolute disposal of the revenue levied upon them. But the clear na- 
tional profit derived from the acquisition, is by no means so considerable, 
as may be generally supposed; for the charges of administration and pro- 
tection must be deducted. Colqulioun, in his Treatise on the Wealth, Pow- 
er, and Resources of the British Empire, which gives an exaggerated picture 
of them, states the total revenue of the sovereign company, at 18,051,478Z. 
sterling; and its expenditure at 16,984,271/.; leaving a surplus of 
1,067,207Z. (a) 

In all probability, were India in a state of national independence, the 
commerce between her and Great Britain would increase so much, as to 
produce to the latter an additional revenue, larger than the amount of that 
surplus, to say nothing of the increase of individual profits. 

t When I speak of the advantage of American emancipation to Great Bri- 
tain herself, I mean commercial, not political advantage. I know very well, 
that the latter is doomed to fall, and that by the instrumentality of her re- 
volted offspring. But this catastrophe will not have originated in the strug- 
gle for colonial independence : but in the insubstantial and perishable basis 
of British, and in the solidity and progressive character of American great- 



(a) The position of the British power in India, has been every way im- 
proved by the late operations; for an account of which, and of the present 
financial resources of the company, vide Narrative of the late Operations, by 
H. T. Prinsep. It is by no means clear, that the independence of India 
would, at present, produce the advantages anticipated by our author; for 
those advantages would depend upon its better administration, to which the 
natives are at present hardly competent. T. 



158 ON PRODUCTION. book i. 

time to drop our absurd lamentations for the loss of out colonies, 
considered as a source of national prosperity. For, in the first 
place, France now enjoys a greater degree of prosperity, than 
while she retained her colonies ; witness the increase of her po- 
pulation. Before the revolution, her revenues could maintain but 
twenty-five miUions of people : they now support thirty millions, 
(1S19). In the second place, the first principles of political eco- 
nomy will teach us, that the loss of colonies by no means implies 
a loss of the trade with them. Wherewith did France before 
buy the colonial products? with her own domestic prodvicts to 
be sure. Has she not since continued to buy them in the same 
way, though sometimes of a neutral, or even an enemy? 

I admit, that the ignorance and vices of her rulers for the time 
being have made her pay for those products much dearer, than 
she need have done ; but now that she buys them at the natural 
price, (exclusive of course, of the import duties,) and pays for 
them as before with her domestic products, in what way is she 
a loser? Political convulsions have given a new direction to 
commerce ; the import of sugar and coffee is no longer confined 
to Nantes and Bordeaux ; and those cities have suffered in con- 
sequence. But, as France now consumes at least as much of 
those articles as she ever did, all, that has not come by the way 
of Nantes or Bordeaux, must needs have found its way in some 

ness. («) National power, resting upon dominion by land oi- sea, can never 
be permanent; because it arrays against itself the interests and passions of 
mankind; and it is utterly impossible, that any nation should henceforward 
enjoy external sway, so extensive, or so longlived as that of the Romans ; 
knowledge is too far advanced; the means of resistance too well understood, 
and mutual intercourse too general and too free. 



(a) Our author seems here and elsewhere, to dwell with some satisfaction 
on the prospect of the political degradation of Great Britain. But he for- 
gets, that the same productive power, which has raised her to pre-eminencej 
may still uphold her, if properly directed. The sources of her greatness 
are natural means, operated upon by her domestic industry : her external 
sway is rather the index of the existence and amount, than the essence of 
her superiority. Neither is the basis of American greatness quite so sub- 
stantial as he seems to imagine. In short, every nation has in itself the 
seeds of wealth and improvement, as well as of decay and impoverishment. 
Britain has industry, intelligence, and capital; her bane is heavy debt and 
taxation, aggravated by a poor-law system. America has industry and ter- 
ritorial extent; but she has negro-slavery, a more formidable source of mis- 
chief than any one of Britain's scourges. The southern states, which are 
now cultivated by negroes, will one day probably be tlie scene of negro 
dominion, and a thorn in the side of the giant republic. The sources of na- 
tional prosperity or decay, may be checked or stimulated, re-opened or de- 
stroyed by human agency. Our author reckons with too much confidence 
upon the perpetuation of ministerial folly and corruption ; and, to say the 
truth, both the experience of the past, and the observation of the present, 
fully warrant him in so doing. But the progress of intelligence in the na- 
tion, may enforce the tardy acquiescence of authority. T. 



CHAP. XIX. ON PRODUCTION. 159 

other channel. France can not have bought in any other way, 
than as of old, with the products of her own land, capital, and in- 
dustry, for, excepting robbery and piracy, one nation has no other 
means of buying of another. Indeed, France might have benefit- 
ed largely by the trade, which has supplanted her own colonial 
commerce, had not old prejudices and erroneous notions con- 
stantly opposed the natural current of human atTairs. 

Perhaps it may be argued, that the colonies furnish commodi- 
ties, which are no where else to be had. The nation, therefore, 
that should have no share of territories so highly favoured by 
nature, would lie at the mercy of the nation, that should first get 
possession; for the monopoly of purchasing the colonial produce 
would enable her to exact her own price from her less fortunate 
neighbour. Now it is proved beyond all doubt, that what we 
erroneously call colonial produce, grows every where within the 
tropics, where the soil is adapted to its cultivation. The spices 
of the Moluccas are found to answer at Cayenne, and probably 
by this time in many other places ; and no monopoly was ever 
more complete, than the trade of the Dutch in that commodity. 
They had sole possession of the only spice islands, and allowed 
nobody else to approach them. Has Europe been in any want 
of spices, or has she bought them for their weight in gold? Have 
we any reason to regret the not having devoted two hundred 
years of war, fought a score of naval battles, and sacrificed some 
hundreds of millions, and the lives of half a million of our fellow 
creatures, for the paltry object of getting our pepper and cloves 
cheaper by some two or three sous a pound? And this example, 
it is worth while to observe, is the most favourable one for the 
colonial system, that could possibly be selected. One can hardly 
imagine the possibility of monopolizing sugar, a staple product 
of most parts of Asia, Africa, and America, so completely as the 
Dutch did the spice trade; yet has this very trade been snatched 
from the avaricious grasp of the monopolist nation, almost with- 
out firing a shot. 

The ancients, by their system of colonization, made themselves 
friends all over the known world ; the moderns have sought to 
make subjects, and therefore have made enemies. Governors, 
deputed by the mother-country, feel not the slightest interest in 
the diffusion of happiness and real wealth amongst a people, with 
whom they do not propose to spend their lives, to sink into pri- 
vacy and retirement, or to conciliate popularity. They know 
their consideration in the mother-country will depend upon the 
fortune they return with, not upon their behaviour in office. Add 
to this the large discretionary power, that must unavoidably be 
vested in the deputed rulers of distant possessions, and there 
will be every ingredient towards the composition of a truly detest- 
able government. 

It is to be feared, that men in power, like the rest of mankind, 



160 ON PRODUCTION. book i. 

are too little disposed to moderation, too slow in their intellectual 
progress, embarrassed as it is at every step by the unceasing 
manoeuvres of innumerable retainers, civil, military, financial, and 
commercial; all impelled, by interested motives, to present things 
in false colours, and involve the simplest questions in obscurity, 
to allow any reasonable hope of accelerating the downfal of a sys- 
tem, which for the last three or four hundred years must have won- 
derfully abridged the inestimable benefits, that mankind at large, 
in all the five great divisions of the globe,* have, or ought to 
have derived from the rapid progress of discovery, and the pro- 
digious impulse given to human industry since the commence- 
ment of the sixteenth century. The silent advances of intelli- 
gence, and the irresistible tide of human affairs will alone effect its 
subversion. 



CHAPTER XX. 



OF TEMPORARY AND PERMANENT EMIGRATION CONSIDERED IN 
REFERENCE TO NATIONAL WEALTH. 

When a traveller arrives in France, and there spends 10,000 
fr., it must not be supposed that the whole sura is clear profit to 
France. The traveller expends it in exchange for the values he 
consumes : the effect is just the same, as if he had remained 
abroad, and sent to France for what he wanted, instead of com- 
ing and consuming it here ; and is precisely similar to that of in- 
ternational commerce, in which the profit made is not the whole 
or principal value received, but a larger or smaller per centage 
upon that principal, according to the circumstances. 

The matter has not hitherto been viewed in this light. In the 
firm conviction of this maxim, that metal-money was the only 
item of real wealth, people imagined, that, if a foreigner came 
amongst them with 10,000 fr. in his pocket, it was so much 
clear profit to the nation : as if the tailor that clothes him, the 
jeweller that furnishes him with trinkets, the victualler that feeds 
him, gave him no values in exchange for his specie, but made a 
profit equal to the total of their respective charges. All that the 
nation gains is, the profit upon its dealings with him, and upon 
what he purchases : and this is by no means contemptible, for 

* The vast continent of New Holland, with its surrounding islands, is now 
generally considered by geographers as a distinct portion of the globe, un- 
der the denomination of Australia or Austrasia, which has been given to it 
on account of its position exclusively within the southern hemisphere. 



CHAP. XX. ON PRODUCTION. 161 

every extension of commerce is a proportionate advantage ;* but 
it is vi^ell to know its real amount, that we may not be betrayed 
into the folly of purchasing it too dearly. An eminent writer 
upon commercial topics, tells us, that theatrical exhibitions can 
not be too grand, too splendid, or too numerous; for that they are 
a kind of traffic wherein France receives all and pays nothing ; 
a proposition which is the very reverse of truth; for France pays, 
that is to say, loses, the whole expense of the exhibition, which 
is productive of nothing but barren amusement, and leaves 
no value whatever to replace what has been consumed on it. 
r^tes of this description may be very pleasant things as affording 
amusement, but must make a ridiculous , figure as a speculation 
of profit and loss. What would people think of a tradesman, 
that was to give a bail in his shop, hire performers, and hand re- 
freshments about, with a view to benefit in his business 1 Be- 
sides it may reasonably be doubted, whether a fete or exhibition 
of the. most splendid kind, does in reality occasion any consider- 
able influx of foreigners. Such an influx would be much more 
powerfully attracted by commerce, or by rich fragments of anti- 
quity, or by master-pieces of art nowhere else to be seen, or by 
superiority of climate, or by the properties of medicinal waters, 
or, most of all, by the desire of visiting the scenes of memorable 
events, and of learning a language of extensive acceptation. I 
am strongly inclined to believe, that the enjoyment of a few 
empty pleasures of vanity has never attracted much company 
from any great distance. People may go a few leagues to a ball 
or entertainment, but will seldom make a journey for the pur- 
pose. It is extremely improbable, that the vast number of Ger- 
mans, English, and Italians, who visit the capital of France in 
time of peace, are actuated solely by the desire of seeing the 
French opera at Paris. That city has fortunately many wor- 
thier objects of general curiosity. In Spain, the bull-fights are 
considered very curious and attractive; yet 1 can not think many 
Frenchmen have gone all the way to Madrid to witness that di- 
version. Foreigners, that have already come into the country 
on other accounts, are indeed frequent spectators of such exhibi- 
tions; but it was not solely with this object that they first set out 
t upon their journey, (a) 

* A strange country has some advantages over the traveller, and its deal- 
ings w^ith him may be considered as lucrative; for his ignorance of the lan- 
guage and of prices, and often a spice_ of vanity, make him pay for most of 
the objects of his consumption above the current rate. Besides, the public 
sights and exhibitions, which he there pays for seeing, are expenses alrea- 
dy incurred by the nation, which he nowise aggravates by his presence. 
But these advantages, though real and positive, are very limited in amount, 
and must not be over-rated. 

(a) This has become a matter of some interest to England, whose un- 
productive capitalists and proprietors have absolutely overwhelmed the 

29 



16^ ON PRODUCTION. book i. 

The vaunted fetes of Louis XIV. had a still more mischievous 
tendency. The sums spent upon them were not supplied by fo- 
reigners, but by French provincial visiters, who often spent in a 
week, as much as would have maintained their families at home 
for a year. So that France was two ways a loser; first, of the 
sums expended by the monarch, which had been levied on the 
subjects at large ; secondly, of all that was spent by individuals. 
The sum total of the consumption was thrown away, that a few 
tradesmen of the metropolis might make their profits upon it ; 
which they would equally have done, had their industry and ca- 
pital taken a more beneficial direction. 

A stranger, that comes into a country to settle there, and 
brings his fortune along with him, is a substantial acquisition to 
the nation. There is in this case an accession of two sources 
of wealth, industry and capital : an accession of full as much 
value, as the acquirement of a proportionate extension of terri- 
tory ; to say nothing of what is gained in a moral estimate, if the 
emigrant bring with him private virtue and attachment to the 
place of his adoption. " When Frederick William came into the 
regency," says the royal historian of the house of Brandenburgh, 
"there was in the country no manufacture of hats, of stockings, 



society of France and a great part of Italy, where they consume an im- 
mense revenue, derived from Britain by the export of her manufactures 
without any return. Tlius their native country is, pro tanto, a producer 
without being a consumer ; — The scene of exertion but not of eiijoyment. — 
This circumstance, although nowise prejudicial to her productive powers, 
is extremely so to the comfort and enjoyment and content of her popula- 
tion ; for there are few enjoyments so personal and selfish, as not to be dif- 
fused in some degree or other at the moment and place of consumption. — 
Besides, the presence of the proprietor is always a benefit, especially in 
Great Britain, where so many public duties are gratuitously performed. — 
Ireland suffers in a worse degree ; her gentry are attracted by England as 
well as the continent ; and the consequences have long been matter of re- 
gret and complaint. Though it might be impolitic to check the efilux by 
authoritative measures, it should at least not be directly encouraged and 
stimulated, as it really is, by the financial system, which the English mi- 
nistry so obstinately persevere in. Almost the whole of the taxation is 
thrown immediately upon consumption ; whilst the permanent sources of 
production and the clear rent they yield to the idle proprietor are left un- 
touched. — The proprietor has, therefore, an obvious interest in effecting 
his consumption where it is least burthened with taxation ; that is to say, 
any where but in England. His property is protected gratuitously, and the 
charge of its protection defrayed by the productive classes, who thus are 
compelled to pay for the security of other people's property as well as their 
own, and are themselves unable to imitate their unproductive countrymen, 
by running away from domestic taxation. A more unjust and discourag- 
ing system could not have been devised. Its evils are daily increasing, 
and threaten the most serious diminution of the national resources. — But 
the ministers neither see the -mischief themselves, nor will listen to the 
warnings of others. Many of them, indeed, have an interest in perpetuat- 
ing an exemption, by which they benefit personally. T. 



CHAP. XX. ON PRODUCTION. 163 

of serge, or woollen stuff of any kind. All these commodities 
were derived from French industry. The French emigrants in- 
troduced amongst us the making of broadcloths, baizes and 
lighter woollens, of caps, of stockings wove in the frame, of hats 
of beaver and felt, as well as dyeing in all its branches. Some 
refugees of that nation established themselves in trade, and re- 
tailed the products of their industrious countrymen. Berlin soon 
could boast of its goldsmiths, jewellers, watch-makers, and car- 
vers ; those of the emigrants, that settled in the low country, in- 
troduced the cultivation of tobacco, arid of garden fruits and ve- 
getables, and by their exertions converted the sandy tract in the 
environs into capital kitchen-garden grounds." 

This emigration of industry, capital, and local attachment, is 
no less a dead and total loss to the country thus abandoned, than 
it is a clear gain to the country afifoiding an asylum. It was 
justly observed by Christina, queen of Sweden, upon the revoca- 
tion of the edict of Nantes, that Louis XIV. had used his right 
hand to cut off his left. 

Nor can the calamity be prevented by any measures of legal 
coercion. A fellow-citizen can not be forcibly retained, unless 
he be absolutely incarcerated ; still less can be be prevented 
from exporting his moveable property, if he be so inclined. For, 
putting out of the question the channel of contraband, which can 
never be closed altogether, he may convert his effects into goods, 
whose export is tolerated or even encouraged, and consign, or 
cause them to be consigned, to some correspondent abroad. 
This export is a real outgoing of value : but how is it possible 
for government to ascertain, that it is intended to be followed 
by no return 1* 

The best mode of retaining and attracting mankind is, to treat 
them with justice and benevolence ; to protect every one in the 
enjoyment of the rights he regards with the highest reverence ; 
to allow the free disposition of person and property, the liberty 
of continuing or changing his residence, of speaking, reading, 
and writing in perl'ect security, (o) 

* In 1790, when the new authorities of France indemnified the holders 
of suppressed offices in paper-money, these discarded functionaries for the 
most part converted their assigndis into specie, or other commodities of 
equal value, which they took or sent out of the country. The consequent 
national loss to France was nearly as great, as if they had received their 
indemnities in cash ; for its paper representative had not then suffered any 
material depreciation. Even when the individual remains himself in the 
country, he can not be prevented from transferring his fortune thence, if he 
be determined upon so doing. 



(a) England enjoys all these in a higher degree than any country in Eu- 
rope ; yet they are all more than counterbalanced by the severity and ini- 
quity of taxation, as appears by the large efflux of all classes not retained 
by local ties. Taxation under a free government may prove equally harass- 



164 ON PRODUCTION. book i. 

Having thus investigaied the means of production, and point- 
ed out the circumstances, that render their agency more or less 
prolific, it would be endless, as well as foreign to my subject, to 
attempt a general review of all the various products, that com- 
pose the wealth of mankind : such a task would furnish materials 
for many distinct treatises. But there is one amongst these pro- 
ducts, the uses and nature of which are very imperfectly known, 
although the knowledge of thera would throw much light upon 
the matter now under discussion : for which reason I have deter- 
mined, before the conclusion of this part of my work, to give a 
separate consideration to the product money, which acts so pro- 
minent a part in the business of production, in the character of 
the principal agent of exchange and transfer. 



CHAPTER XXI. 

OF THE NATURE AND USES OP MONEY. 



SECTION I. 

General Remarks. 

In a society ever so little advanced in civilization, no single 
individual produces all that is necessary to satisfy his own wants; 
and it is rarely that an individual, by his single exertion, creates 
even any single product ; but even if he does, his wants are not 
limited to that single article ; they are numerous and various, 
and he must, therefore, procure all other objects of his personal 
consumption, by exchanging the overplus of the single product 
he himself creates beyond his own wants, for such other products 
as he stands in need of. And, by the way, it is observable, that, 
since individual producers, in every line, keep for their own use 
but a very small part of their own products ; the gardener, of the 
vegetables he raises, the baker, of the bread he bakes, the shoe- 



ing with the oppression of a despotic one. But it may be doubted, whether 
Englishmen would in such numbers exchange the tyranny of taxation for 
the inferior liberty of foreign society, were they not actually more favoured 
abroad, and allowed a greater license, than even the native population. At 
all events, the English government has the power of turning the tide, and 
bringing back the majority of the fugitives, by changing tlie form of its 
taxation, and transferring its pressure from floating to fixed property, 
which can not emigrate : in short by relieving consumption, and taxing 
the clear revenue of the appropriated sources of production. Vide supra, 
note (a) p. 230. T. 



CHAP. XXI. ON PRODUCTION. 165 

maker, of the shoes he makes, and so of all others ; the great 
bulk, nay almost the whole of the products of every community, 
arrive at consumption by the medium of exchange. 

This is the reason, why it has been erroneously concluded, 
that exchange and transfer are the basis and origin of the pro- 
duction of wealth, and of commerce in particular ; whereas they 
are only secondary and accessary circumstances ; inasmuch as, 
were each family to raise the whole of the objects of its own 
consumption, as we see practised in some instances in the back 
settlements of the United States, society might continue to exist, 
without a single act of exchange or transfer. I make this re- 
mark, merely with a view to correctness of first principles, with- 
out any design to detract from the importance of exchange and 
transfer to the progressive advance of production ; indeed, I set 
out with the position, that they are indispensable in an advanced 
stage of civilization. 

Admitting, then, the necessity of interchange, let us pause a 
moment, and consider, what infinite confusion and difficulty 
must arise to all the different component members of society, 
who are for the most part producers of but a single article, or 
two or three at the utmost, but of whom even the poorest is a 
consumer of a vast number of different products ; I say, what 
difficulty must ensue, were every one obliged to exchange his 
own products specifically for those he may want ; and were the 
whole of this process carried on by a barter in kind. The hun- 
gry cutler must offer the baker his knives for bread ; perhaps, 
the baker has knives enough, but wants a coat ; he is willing to 
purchase one of the tailor with his bread, but the tailor wants not 
bread, but butcher's meat ; and so on to infinity. 

By way of getting over this difficulty, the cutler, finding he 
can not persuade the baker to take an article he does not want, 
will use his best endeavours to have a commodity to offer, which 
the baker will be able readily to exchange again for whatever he 
may happen to need. If there exist in the society any specific 
commodity that is in request, not merely on account of its inhe- 
rent utility, but likewise on account of the readiness with which 
it is received in exchange for the necessary items of consump- 
tion, and the facility of proportionate subdivision, that commodi- 
ty is precisely what the cutler will try to barter his knives for ; 
because he has learnt from experience, that its possession will 
procure him without any difficulty by a second act of exchange, 
bread or any other article he may wish for. 

Now money is precisely that commodity. 

The two qualities, that give a general preference of value, in 
the shape of the current money of the country to the same amount 
of value in any other shape, are: — 

1. The aptitude, in the character of an intermedial object of 
exchange, to help all who have any exchange or any purchase to 



166 ON PRODUCTION. book i. 

make, that is to say, every member of the community, towards 
the specific object of desire. The general confidence, that mo- 
ney is a commodity acceptable to every body, inspires the assu- 
rance of being able, by one act of exchange only, to procure the 
immediate object of desire, whatever it may be; whereas, the 
possessor of any other commodity can never be sure, that it 
will be acceptable to the possessor of that particular object of 
desire. 

2. The capability of subdivision and precise apportionment to 
the amount of the intended purchase; which capability is a re- 
commendation to all, who have purchases to make; in other 
words, to every member of the community. Every one is, there- 
fore, anxious to barter for money the product whereof he holds a 
superfluity, and which is commonly that he himself produces; 
because, in addition to the other quality above stated, he feels 
sure of being able to buy with its value in that shape as small or 
as large a portion of corresponding value, as he may require ; 
and because he may buy, whenever and wherever he pleases, 
such objects as he may desire to have in lieu of the product he 
has sold originally. 

In a very advanced stage of civilization, when individual wants 
have become various and numerous, and productive operations 
very much subdivided, exchanges become a matter of more ur- 
gent necessity, as well as much more frequent and more com- 
plicated; and personal consumption and barter in kind becomes 
less practicable. For instance, if a man makes not the whole 
knife, but the handle of it only, as in fact is the case in towns 
where cutlery is conducted on a large scale, he does not produce 
any thing that he can turn to account; for what could he do with 
the handle without the blade? He can not himself consume the 
smallest part of his own product, but must unavoidably exchange 
the whole of it for the necessaries or conveniences of life, for 
bread, meat, linen, &c. But neither baker, butcher, nor weaver, 
can ever stand in need of an article, that is fit for nobody but 
the finishing cutler, who can not himself give either bread or 
meat in exchange; because he produces neither; and who must, 
therefore, give some one commodity, that, by the custom of the 
country, may be expected to pass currently in exchange for most 
others. 

Thus, money is the more requisite, the more civilized a nation 
is, and the further it has carried the division of labour, (a) Yet 



(a) The utility of money is intense, in the compound ratio of the division 
of labour and the variety of individual consumption. A sugar colony in the 
West Indies, though highly productive in proportion to its population, re- 
quires little money to facilitate the transfer of the produce ; because the 
bulk of the population, the negroes, have very little variety of consumption : 
they are fed, clothed, &c, in the wholesale, and in the plainest and most 



CHAP. XXI. ON PRODUCTION. 167 

history contains precedents of considerable states, in which the 
use of any specific article, as money, was utterly unknown; as 
we are told it was among the Mexicans at the time of the disco- 
very. We are informed, that, just about the period of their con- 
quest by the Spanish adventurers, they were beginning to employ 
the cocoa-nut as money, in the smaller transactions of com- 
merce.* (1) 

I have referred to custom, and not to the authority of govern- 
ment, the choice of the particular article that is to act as money 
in preference to every other: for though a government may 
coin what it pleases to call crowns, it does not oblige the subject 
to give his goods in exchange for these crowns, at least not 
where property is at all respected. Nor is it the mere impres- 
sion, that makes people consent to take this coin in exchange for 
other products. Money passes current like any other commodi- 
ty; and people may at liberty barter one article for another in 
kind, or for gold in bars, or silver bullion. The sole reason why 
a man elects to receive the coin in preference to every other ar- 
ticle, is, because he has learnt from experience, that it is pre- 
ferred by those, whose products he has occasion to purchase. 
Crown pieces derive their circulation as money from no other 
authority than this spontaneous preference: and if there were 
the least ground for supposing, that any other commodity, as 
wheat, for instance, would pass more currently in exchange fox* 
what they calculate upon wanting themselves, people would not 
give their goods for crown pieces, but would demand wheat, 
which would then be invested with all the properties of money. 
And this has occurred occasionally in practice, where the autho- 
rized or government money has consisted of paper destitute of 
credit or public confidence. 

Custom, therefore, and not the mandate of authority, desig- 
nates the specific product that shall pass exclusively as money, 
whether crown pieces or any other comniodity whatever.| 

* Raynal. Hist.pMl. et pol. lib. vi. 

t When the intercourse between the Europeans and the negroes of the 
river Gambia first commenced, the commodity most in request with them 
was iron, for the purposes of war and of tillage. Iron, therefore, became 
the standard of comparison of value. In a little time, it became a mere no- 
minal standard in their mercantile dealings; and a bar of tobacco consist- 
ing of 20 or 30 leaves of that herb, was given for a bar of rum, consisting of 



uniform manner. Yet, possibly, the division both of agricultural and ma- 
nufacturing labour on each plantation may be carried to considerable 
length. T. 



(1) [Not the cocoa-nut, but grains of cacao. This, however, is the error 
of the translator.] American Editor. 



168 ON PRODUCTION. book i. 

The more frequent recurrence of the exchange of every indi- 
vidual product for the commodity, money, than for any other 
product, has attached particular names to this transaction ; thus, 
to receive money in exchange is called, selling, and to give it, 
buying. 

In this way originated the use of money. These positions 
are by no means purely speculative; for on them must all argu- 
ments, and laws, and regulations, on the subject of money, be 
grounded. A system built upon any other foundation can pos- 
sess neither beauty nor solidity, and must fail to fulfil the object 
of its construction. 

With the view of throwing the utmost possible light upon the 
essential properties of money, and the principal contingencies it 
is subject to, I shall treat of Vhese particulars in separate sec- 
tions, and endeavour to enable such, as may give me their atten- 
tion, to follow with ease the chain of connexion, notwithstand- 
ing that classification; and themselves to arrange in one compre- 
hensive view the whole play of the mechanism, and the causes 
of that derangement, which human folly or misfortune may occa- 
sionally effect. 

SECTION II. 

Of the Material of Money. 

If, as it would appear by the reasoning in the preceding sec- 
tion, money be employed as a mere intermedial object of ex- 
change between an object in possession and the object of desire, 
the choice of its material is of no great importance. Money is 
not desired as an object of food, of household use, or of personal 
covering, but for the purpose of re-sale, as it were, and re-ex- 
change for some object of utiUty, after having been originally 
received in exchange for one such already. Money is, there- 
fore, not an object of consumption; it passes through the hands 
without sensible diminution or injury; and may perform its office 
equally well, whether its material be gold or silver, leather or 
paper. 

Yet, to enable it to execute its functions, it must of necessity 
be possessed of inherent and positive value; for no man will be 
content to resign an object possessed of value, in exchange for 
another of less value, or of none at all. 

four or five pints, according to the abundance or scarcity of the article. In 
such a state of society, each product successively performs the functions of 
money, in reference to all other products; which leaves the community 
subject to all the inconveniences of barter in kind, the chief of which is, the 
inability to offer any one article in general request and acceptation, and 
capable of ready apportionment in amount to other commodities at large. 
Vide Travels of Mungo Park, vol. i. c. 3. 



CHAP. XXI. ON PRODUCTION. 169 

There are some other less essential requisites, which add to 
its efficiency. A material, wherein these are not combined, is 
unfit for the purpose, and can not hope to engross its functions 
either generally or permanently. 

We are told by Homer, that the armour of Diomede had cost 
nine oxen. A warrior, that wished to arm himself at half the 
price, must have been puzzled to pay four oxen and a half. 
Wherefore, the article employed as money must be capable of 
being readily and without injury apportioned to the different ob- 
jects of desire, and subdivided in such manner, as to admit of 
exchanges of the exact amount required. 

Again, we read, that in Abyssinia, they make use of salt for 
money. If the same custom prevailed in France, a man must 
take a mountain of salt to market to pay for his weekly provi- 
sions. Wherefore, the commodity employed as money must not 
be so abundant, as to make it necessary to transfer a large quan- 
tity, on each recurring act of exchange. 

At Newfoundland, it is said, that diied cod performs the office 
of money ; and Smith makes mention of a village in Scotland, 
where nails are made use of for that purpose.* Besides many 
other inconveniences, that substances of this nature are subject 
to, there is this grand objection, that the quantity may be enlarg- 
ed almost at pleasure, and in a very short space of time, and 
thereby a vast fluctuation effected in their relative value. But 
who would readily accept in exchange an article, that might per- 
haps, in a few moments lose the half or three-fourth of its value? 
Wherefore, the commodity employed as money must be of such 
difficult acquisition, as to ensure those who take it from the dan- 
ger of sudden depreciation. 

In the Maldive Islands, and in some parts of India and Africa, 
shells, called cowries, are employed as money, although they 
have no intrinsic value, except that they serve for ornament to 
some rude tribes. This kind of money would never do for na- 
tions that carry on trade with many parts of the globe; a medium 
of exchange of such very limited circulation would offer insuper- 
able objections. It is natural for people to receive most willingly 
in exchange that article, which is the most universally received 
in like manner by other people in their turn. 

We need not, then, be surprised, that almost all the commer- 
cial nations of the world should have selected metal to perform 
the office of money ; when once the more industrious and com- 
mercial communities had declared their choice, all the rest had 
an evident inducement to follow their example. 

At times, when the metals now most abundantly produced 
were yet rare, people were content to make use of them for the 
purpose. The legal currency of Lacedsemon was of iron ; that 

* Wealth of Nations, book i. c. 4. 
30 



170 ON PRODUCTION. book i. 

of the early Romans of copper. In proportion as those metals 
were extracted from the earth in greater quantity, they became 
liable to the objection above stated in respect to all products of 
too little comparative* value ; and it is long since the precious 
metals, that is to say, gold and silver, have been almost univer- 
sally adopted. To this use they are particularly applicable : 

1. As being divisible into extremely minute portions, and ca- 
pable of re-union, without any sensible loss of weight or value; 
so that the quantity may be easily apportioned to the value of the 
article of purchase. 

2. The precious metals have a sameness of quality all over 
the world. One grain of pure gold is exactly similar to another, 
whether it came from the mines of Europe or America, or from 
the sands of Africa. Time, weather, and damp, have no power 
to alter the quality ; the rejative weight of any specific portion, 
therefore, determines at once its relative quantity and value to 
every other portion : two grains of gold are worth exactly twice 
as much as one. 

3. Gold and silver, especially with the mixture of alloy, that 
they admit oi", are hard enough to resist very considerable fric- 
tion, and are therefore fitted for rapid circulation, though, indeed, 
in this respect, they are inferior to many kinds of precious stones. 

4. Their rarity and consequent dearness is not so great that 
the quantity of gold or of silver, equivalent to the generality of 
goods, is too minute for ordinary perception ; nor, on the other 
hand, are they so abundant and cheap, as to make a large value 
amount to a great weight. It is possible, that, in progress of 
time, they may become liable to objection on this score ; espe- 
cially if new and rich veins of ore should be discovered : and 
then mankind must have recourse to platina, or some other yet 
unknown metal, for the purposes of currency. 

Lastly, gold and silver are capable of receiving a stamp or 
impression, certifying the weight of the piece, and the degree of 
its purity. 

Although the precious metals used for money have generally 
some mixture of baser metal, generally of copper, by way of 
alloy, the value of the baser metal, thus incorporated, is reck- 
oned for nothing. Not that the alloy is itself destitute of va- 
lue ; but because the operation of disuniting it from the purer 
metal, would cost more than it would be worth, after it was ex- 
tracted. For this reason a piece of coined gold or silver, mixed 

* The money of Lacedsemon is a proof of the position, that public autho- 
rity is competent of itself to give currency to its money. The laws of Ly- 
curgus directed the money to be made of iron, purposely to prevent its being 
easily hoarded, or transferred in large quantities ; but they were inopera- 
tive, because they weiit to defeat these, the principal purposes of money. 
Yet no legislator was ever more rigidly obeyed than Lycurgus. 



CHAP. XXI. ON PRODUCTION. 171 

with alloy, is estimated by the quantity of precious metal only 
contained in it.* 



SECTION III. 

Of the Accession of Value a Commodity receives by being vested 
iviih the Character of JMoney. 

From the foregoing sections it will appear, that money is in- 
debted for its currency, not to the authority of the government, 
but to its being a commodity bearing a peculiar and intrinsic va- 
lue. But its preference, as an object of exchange, to all other 
commodities of equivalent value, is owing to its characteristic 
properties as money ; and to the peculiar advantage it derives 
from its employment in that character ; namely, the advantage 
of being in universal use and request. The whole population, 
from the lowest degree of poverty to the highest of wealth, must 
effect exchanges, must buy the objects of want, must be consumers 
of money ; or, in other words, must obtain possession of the 
commodity, that acts as the medium of exchange, the commodity 
generally admitted to be best suited, and most frequently em- 
ployed for that purpose. A man that has any other commodity, 
jewels for instance, to offer in exchange for the necessaries or 
luxuries he may have occasion for, can not get those necessaries 
or luxuries by the process of exchange, until be has found a 
consumer for his jewels ; nor can he even then be sure, that 
such a consumer will be able to give him in return, the very 
identical article he may want : whereas, a man, with money in 
his pocket, is white certain, that it will be acceptable to the per- 
son, of whom he would buy any thing ; because that person will, 
in turn, be himself obliged to become a purchaser in like man- 
ner.^ With the commodity, money, he can obtain all he wants 
by a single act of exchange only, called a purchase ; whereas, 
with all others two acts at least are necessary ; a sale and a pur- 
chase. This is the sum total of its advantages in the character 

* The present silver coin of France contains one part copper, to nine 
parts fine silver : the relative value of copper to silver being as 1 to 60, or 
thereabouts. So that the copper contained in the whole silver coinage, 
amounts to about 1-600 of the total value of the silver coin, or 1 cent in 6/r. 
Supposing it were attempted to disengage the copper, it would not pay the 
expenses of the process of separation ; to say nothing of the value of the 
impression that must be destroyed. Wherefore, it is reckoned for nothing 
in the valuation of the coin. A piece of 5/r. presents the idea of the 22 1-2 
grammes of fine silver contained in it, though actually weighing 25 gr. in- 
clusive of the alloy. 

I The other property of money, the capability of subdivision, and appor- 
tionment of the value parted with, must not be lost sight of: by it the jew- 
eller is enabled to exchange a minute portion of his precious commodity for 
the smallest item of his household expenditure. 



172 ON PRODUCTION. book i. 

of money : but it must be obvious to every body, that the prefer- 
ence, thus shown it as money, is a consequence of its actual use 
as such. 

I must here observe, that the adoption of any specific com- 
modity to serve as money considerably augments its intrinsic 
value, or value as an article of commerce. A new use being 
discovered for the commodity, it unavoidably becomes more ini 
request ; the employment of a great part, the half or perhaps 
three-fourths of the whole stock of it on hand, in this new way 
can not fail to render the whole more scarce and dear, (o) 

Were the actually existing stock of silver and gold applied to 
other use, than the fabrication of plate or ornaments, the quan- 
tity would be abundant and much cheaper than it is at present ; 
that is to say, whenever they were exchanged for other commo- 
dities, more of them would be given or received in proportion to 
the value obtained in exchange. But a large portion of these 
metals being destined to act as money, and exclusively occupied 
in that way, there is less remaining to be manufactured into jew- 
ellery and plate, and the scarcity of course adds to the value. 
On the other hand, if they were never used in plate or jewellery, 
there would be more of them applicable to the purpose of mo- 
ney, and money would grow cheaper, that is to say, more of it 
would be necessary to purchase an equal quantity of goods. The 
employment of the precious metals in manufacture makes them 
scarcer and dearer as money ; in like manner as their employ- 
ment as money makes them scarcer and dearer in manufacture.* 

Hence it naturally follows, that these metals being, by reason 
of their employment as money, raised to such a price, as pre- 
cludes their so general use in the form of plate and jewellery, it 
is in consequence found less convenient to use them in that form. 

* Ricardo and some other writers maintain, that the charges of obtaining 
the metal wholly determine its price or relative value in exchange for all 
other commodities. According to their notions, therefore, the want or de- 
mand nowise influences that price ; a position in direct contradiction to 
daily and indisputable experience, which leads us invariably to the conclu- 
sion, that value is increased by increase of demand. Supposing that, by 
the discovery of new mines, silver were to become as common as copper, it 
would be subject to all the disqualifications of copper for the purposes of 
money, and gold would be more generally employed. The consequent in- 
crease of the demand for gold would increase the intensity of its value ; 
and mines would be worked, that are now abandoned, because they do not 
defray the expense. It is true, that the ore would then be obtained at a 
heavier rate ; but will any one deny, that the increased value of the metal 
would be owing to the increased demand for it ? It is the increased inten- 
sity of that demand, that determines the miner to incur the increased 
charge of production. 



(a) This point has been well observed upon by Turgot. Refl. sur la Form, 
et Distrib, des Rich. 



CHAP. XXI. ON PRODUCTION. 173 

The luxury costs more than it is worth. Thus, massive gold 
plate has gone completely out of fashion, particularly in those 
countries, where the activity of commerce, and the rapid pro- 
gress of wealth, make gold in great demand for the purposes of 
money. The richest individuals content themselves with gilt 
plate, that is to say, plate covered with a very thin coat of gold ; 
solid gold is used only in smaller articles of manufacture, and 
those in which the value of the workmanship exceeds that of the 
metal. In England, plate is made very light, and people of afflu- 
ence often content themselves with silver-plated goods. The 
ostentation of displaying a large service of that metal costs the 
interest of a considerable capital. 

The increase of the value of metals is, generally speaking, 
attended with some disadvantages; inasmuch as it places many 
articles of comfort and convenience, silver dishes, spoons, &c., 
beyond the reach of most private families ; but there is no dis- 
advantage in such increased value of the metal in its character 
of money ; on the contrary, there is a greater convenience in 
the transfer of a less bulky commodity, on every change of resi- 
dence, and every act of exchange. 

The selection of any commodity, to act as money in but one 
part of the world, increases its value every where else. — There 
is no doubt, that, if silver should cease to be current as money 
in Asia, the value of that metal in Europe would be affected, and 
more of it would be given in exchange for all other commodities: 
for one use of silver in Europe is, the possibihty of exporting it 
to Asia. 

The employment of the precious metals as money by no 
means renders their value stationary ; they remain subject to 
local as well as temporary fluctuations of value, like every other 
object of commerce. In China, half an ounce of silver will pur- 
chase as many objects of use or pleasure as an ounce in France; 
and an ounce of silver in France will generally go much farther 
in the purchase of commodities, than it will in America. Silver 
is more valuable in China than in France, and in France than in 
America. 

Thus money, or specie, as some people call it, is a commo- 
dity, whose value is determined by the same general rules, as 
that of all other commodities ; that is to say, rises and falls in 
proportion to the relative demand and supply. And so intense 
is that dema^, as to have sometimes been sufficient to make 
paper employed as money, equal in value to gold of the same 
denoiiimation; of which the money of Great Britain is a present 
example. 

It must not be imagined, that the paper money of that country 
derives its value from the promise of payment in specie, which 
it purports to convey. That promise has been held out ever 
since the suspension of cash payments by the Bank in 1797, 



174 ON PRODUCTION. book i. 

without any attempt at performance, which many people consi- 
der impossible.* Gold is only procurable piece-meal, and by 
payment of an agio or per centage ; in other words, by giving a 
larger amount in paper for a smaller amount in gold. Yet the 
paper, though depreciated, is invested with value far exceeding 
that of its flimsy material. Whence, then, is that value derived? 
From the urgent want, in a very advanced stage of society and 
of industry, of some agent or medium of exchange. England, 
in its actual state, requires, for the effectuation of its sales and 
purchases, an agent or medium equal in value, say to 1,284,000 
lbs. weight of gold; or, what is the same thmg, to 1,200.,000,000 
lbs. weightof sugar; or, what is still the same thing, to 60,000,0001. 
sterling of paper, taking the Bank of England paper at 30 mil- 
lions and the paper of the country Banks at as much more, (a) 
This is the reason, why the 60 millions of paper, though desti- 
tute of intrinsic value, are, by the mere want of a medium of ex- 
change, made equal in value to 1,284,000 lbs. weight of gold, or 
1,200,000,000 lbs. weight of sugar. 

As a proof, that this paper has a peculiar and inherent value, 
when its credit was the same as at present, and its volume or 
nominal amount was enlarged, its value fell in proportion to the 
enlargement, just like that of any other commodity. — And, as all 
other commodities rose in price, in proportion to the deprecia- 
tion of the paper, its total value never exceeded the same amount 
of 1,234,000 lbs. weight of gold, or, 1,200,000,000 lbs. weight 
of sugar. Why? Because the business of circulating all the va- 
lues of England required no larger value. No government has 
the power of increasing the total national money otherwise than 
nominally. The increased quantity of the whole reduces the 
value of every part; and vice versd.1[ 

* Before the Bank of Eng-land can pay off its notes in cash, the govern- 
ment, its principal debtor, must discharge its debts in specie; which it can 
not do, unless it purchase the specie, either with its savings, or with the 
proceeds of further taxation. In doing so, it would, in effect, substitute 
a new and very costly engine of circulation, which must be purchased by 
the state, for the present one, which, although much out of order, and al- 
together destitute of intrinsic value, is yet made to do the business well 
enough. 

+ For the consequence of an excessive issue of paper-money, vide infra. 
Chap. 22, sect. 4, where the subject of paper-money is discussed. 



(a) It must not be supposed, that our author is ignorant of the wide difl 
ference between Bank of England and country bank paper, viz: that the 
one is paper money, the principal; the other, its convertible representative. 
This position is perfectly correct. Tlie credit, embodied, as it were, in the 
provincial paper, is equally an agent of circulation with the inconvertible 
principal, the paper-money ; which, but for its presence and rivalry, would 
be required in double the quantity, to maintain the same scale of money- 
prices. Great confusion has hitherto prevailed on this subject, for want 
of a clear conception of the concurrent operation of money and its rival, 
credit. T. 



GHAP. XXI. ON PRODUCTION. 175 

Since the national money, whatever be its material, must have 
a peculiar and inherent value, originating in its employment in 
that character, it forms an item of national wealth, in the same 
manner as sugar, indigo, wheat, and all the other commodities 
that the nation may happen to possess.* It fluctuates in value 
like other commodities; and like them too is consumed, though 
less rapidly than most of them. Wherefore, it would be wrong 
to subscribe to the opinion of Garnier, (a) who lays it down as a 
maxim, thut, " so long as silver remains in the shape of money, 
it is not an item of actual wealth in the strict sense of the word; 
for it does not directly and immediately satisfy a want, or pro- 
cure an enjoyment." There are abundance of values incapable 
of satisfying a want, or procuring an enjoyment in their present 
existing shape. — A. merchant may have his warehouse full of in- 
digo, which is of no use in its actual state, either as food or as 
clothing; yet it is nevertheless an item of wealth, and one that 
can be converted at will, into another value fit for immediate use. 
Silver, in the shape of crown pieces, is, therefore, equally an ar- 
ticle of wealth with indigo in chests. Besides, is not the utility 
of money an object of desire in civilized society? 

Indeed, the same writer elsewhere admits that, " specie in the 
coffers of an individual is real wealth, an integral part of his sub- 
stance, which he may immediately devote to his personal enjoy- 
ment ; although, in the eye of political economy, this same coin 
is a mere instrument of exchange, essentially differing from the 
wealth it helps to circulate. "■!■ I hope what I have said is quite 
sufficient to show the complete analogy of specie to all other 
items of wealth. Whatever is wealtli to an individual, is wealth 
to the nation, which is but an aggregate of many individuals; and 
is wealth also in the eye of political economy, which must not be 
misled by the notion of imaginary value, or regard as value any 
thing, but what all the members of the community, individually, 
as well as jointly, treat as value, not nominal, but actual. And 
this is one proof more, and there are not two kinds of truth in 
this, more than in any other science. What is true to an indivi- 
dual, is true to the government, and to the community. Truth 
is uniform ; in the application only can there be any variety. 

* The multiplication of paper-money, and its consequent depreciation, 
effects no augmentation of the wealth of the community, although it makes 
necessary a more liberal use of figures in the estimation; just in the same 
way as its valuation in wheat instead of silver would do. The total of na- 
tional wealth might be 20,000,000,000 kilogr. of wheat, and but 25,000,000 
kilogr. of silver, and yet the value precisely the same. If the value of the 
money be less intense, it will require more of it to express the same degree 
of value. 

t Abrege des Principes dCEconomie Publique, 1 re partie. c. 4, and the ad- 
yertisement prefixed. 



(«) Garnier de Saintes, translator of the Wealth of Nation*. 



176 ON PRODUCTION. book i. 

SECTION IV. 

Of the Utility of Coinage, and of the Charge of its Execution^ 

No mention has hitherto been made of the value, that money 
derives from the impression and coinage. I have merely point- 
ed out the various utility of gold and silver as articles of com- 
merce, wherein originates their value; and considered their fit- 
ness to act as money, as part of that utility. 

Wherever gold and silver act as money, they must of course 
be constantly passing from hand to hand. Most people buy or 
sell several times a day; judge, then, what inconvenience must 
ensue, were it necessary to be always provided with scales to 
weigh the money paid or received; and what infinite blunders 
and disputes must arise from awkwardness or defective imple- 
ments. Nor is this all; gold and silver can be compounded 
with other metals without any visible alteration. The degree of 
purity can not be exactly ascertained, without a delicate and 
complex chemical process. The transactions of exchange are 
wonderfully facilitated, when the weight and standard of each 
piece of money is denoted by an impression, that nobody can 
mistake. 

Metals are reduced to an established standard, and divided 
into pieces of an established weight, by the art of coining. 

The government of each state usually reserves to itself the 
exclusive exercise of this branch of manufacture ; whether with 
a view of gaining somewhat more by the monopoly, than it could, 
if every body were at liberty to practise it, or to hold out to the 
subjects a more solid security, than any private manufacturer 
could offer, which is more frequently the motive. In fact, though 
governments have too often broken faith in this particular, their 
guarantee is still preferred by the people to that of individuals, 
both for the sake of uniformity in the coin, and because there 
would probably be more difficulty in detecting the frauds of pri- 
vate issuers. 

The coinage unquestionably adds a value to the metal coined; 
that is to say, a lump of silver, wrought into a 5fr. piece, is bet- 
ter than an equal weight of bullion of like standard; and for a 
very simple reason. The fashion given to the metal saves the 
person, that takes it in course of exchange, all the charges of 
weighing and assaying, among which the loss of time and labour 
must be reckoned; just in the same manner, as a coat ready 
made is worth more than the materials it is to be made of. Even 
if the business of coining were open to all the world, and go- 
vernment confined itself to fixing the standard, the weight, and 



CHAP. XXI. ON PRODUCTION. 177 

the impression, that each piece should possess, still the holders 
of bullion would find it answer to pay a premium to the coiner, 
for coining their bullion into money; otherwise, they would have 
some difficulty in effecting an exchange, and would, perhaps, lose 
more on the exchange, than it would cost to have the bullion 
converted into coin. 

But the additional value, thus commimicated to the precious 
metals by the coinage, must not be confounded with that, which 
bullion, as an article of trade, receives from the circumstance of 
its employment as money. The latter attaches upon the whole 
stock of gold and silver in existence, a silver tankard is of great- 
er value, because that metal is employed as money, whereas, the 
additional value accruing from the coinage is peculiar to the spe- 
cific portion coined, in like manner as the fashion is peculiar to 
the goblet; and is wholly independent of the value, that the com- 
modity, silver, derives from its various utility. 

In England, the whole expense of coinage is defrayed by the 
government; the same weight of guineas is delivered at the mint 
in return for a like weight of bullion of the legal standard. The 
nation, in quality of consumer of money, is gratuitously present- 
ed with the charges of coining, which are levied by taxation upon 
them in their other character of payers of taxes. Yet gold, in 
the shape of guineas, has an evident advantage over bullion ; not 
that of being ready weighed, for people are often at the pains of 
re-weighing, but that of being ready assayed. Consequently, it 
has happened sometimes, that bullion has been carried to the 
mint, not to be converted into coin, but merely to have the stand- 
ard ascertained, and certified to the foreign or domestic pur- 
chaser, (a) For guineas are a belter article of export than bul- 
lion, inasmuch as bullion, bearing the certificate of assay, is pre- 
ferable to bullion without any such certificate. On the contrary, 
for the purposes of importation into England, gold bullion an- 
swers every purpose of guineas ready coined, and is of just the 
same value, weight and standard being alike; for the mint makes 
no charge for converting the bullion into coin. Foreigners have, 
in fact, an object in keeping back the guineas, which have alrea- 
dy received the certificate of assay, and remitting bullion to Eng- 
land to obtain a Uke gratuitous certificate. This system, there- 



(ffi) That is to say, to receive the certificate of coinage, for use, not in the 
character of money, but as an article of commerce. The assay is charged 
for at the English mint, upon bullion re-delivered without coinage. And, 
before the export of coin was made free, the risk was probably equal to the 
value of the certificate conferred by coinage. These remarks apply to the 
coinage of gold only, silver being now subject to a seignorage of 4s. in 66s. 
But silver is no longer the material of the metallic money, except for mi- 
nute and fractional exchanges. T. 

31 



17S ON PRODUCTION. book i. 

fore, makes it an object to export the coined metal, but holds out 
no encouragement to its reimportation.* 

The mischief is somewhat palliated by an accidental circum- 
stance, which never entered into the calculation of the legisla- 
ture. There is no other mint in England, but that of the metro- 
polis, which is so completely overloaded with business, that it 
can not re-deliver the metal coined till many weeks, and often 
months, after it is brought for coinage. "f" The consequence is, 
that the owner, who leaves his bullion to be coined, loses the 
interest of its value during the whole time it remains in the mint. 
This operates as a small tax on coinage, and raises the value of 
the coin somewhat above that of bullion. For it is manifest, 
that the value would be exactly (he same, if bullion and guineas 
were taken without distinction, weight for weight. 

So much for the efiect of the English regulations on this head. 

All the other governments of Europe, if I mistake not, derive 
from the coinage a revenue more than equal to the charges of 
the process. J The exclusive privilege of issuing money which 
they have most properly engrossed, together with the severe 

* It is hardly necessary to repeat, that the specie exported is not so much 
value lost to the community ; for nobody will feel inclined to make a pre- 
sent of it to the foreigner. Its value is transmitted, for the purpose of ob- 
taining- a corresponding value in return; but the nation loses the value of 
the coinage in this operation. When guineas are exported from England, 
she receives in exchange the value of the metal only, and nothing for the 
impression it bears, (a) 

t Wealth of Nations, book i. c. 5. (6) 

t One of my German translators, the learned Professor Morsfadt, of Hei- 
delberg, has observed upon this passage, that since 1810, the Russian go- 
vernment has made no charge for the coinage. It might with equal reason 
execute gratuitousl}^ the business of letter-carriage, instead of charging for 
it to the individuals, 

I am perhaps incorrect in saying, that most governments make a profit 
over and above the expense of execution. The French government charges 
a seignorage, equal at most to defray the expense of the mere process. But 
the interest and wear and tear of the capital vested in buildings, machinery, 
tScc. and the charge of administration, &c. are so much dead loss to the go- 
vernment ; and probably many other governments are in the same predica- 
ment, 



(a) This is hardly true to the full extent. The Spanish dollars pass cur- 
rent in many countries at a considerable advance on bullion of equal weight 
and fineness, and constitute the legal cm-rency of some communities, that 
have not undertaken the business of coinage themselves ; as in Hayti, and 
elsewhere. The difference is the local value of the coinage, which is paid 
for sometimes very liberally. But to whom is it paid ? to the Spanish indi- 
vidual or to the Spanish government. If to the Ibrmer, it is an undue ad- 
vantage to the individual at the expense of tlie community; if to the latter, 
it is the recompense of productive agency. Were the gold coinage of Eng- 
land subject to a seignorage like the silver, it would never be exported ha- 
bitually, but to such nations, as were content to pay the extra value of the 
coinage. Indeed, our author presently says in express terms, that the va- 
lue of the coinage is not alwa}'s lost on exportation. T. 

(b) The practice has fluctuated since Smith's time, but the principle is 
invariable. T. 



CHAP. XXI. ON PRODUCTION. 179 

penalties denounced against private coiners, would enable them 
to raise the profit of the business very high, by the limitation of 
their issues ; for the value of money, like that of very thing else, 
is always in the direct ratio to the demand, and in the inverse 
ratio to the supply. 

In fact, when silver in the shape of coin is so rare and dear, 
that 90 fr. in coin will purchase the weight of 100 fr. of equal 
fineness in the shape of bullion, it is an indication, that the public 
attaches the same value to 9 oz. of coined, as to 10 oz. of uncoin- 
ed metal. Wherefore, the government can, by its coinage, in 
such case, give to 9 fr. the value of 10/r., and make a profit of 
10 per cent. But, if the coin become more abundant, and more 
of it be necessary in exchange for bullion, it may perhaps be ne- 
cessary to give 95 fr.. in coin for the weight of lOO^j'. in bullion: 
in which latter case, the government can make a profit of no 
more than 5 per cent., upoa the purchase and conversion of bul- 
lion into coin. 

If, in the latter case, the government, with a view to increase 
the ratio of its profit, instead of purchasing bullion itself, were 
simply to charge a seignorage, say of 10 per cent, upon the bul- 
lion brought to the mint for coinage, none at all would be brought 
for that purpose by indviduals, who would have to pay 10 per 
cent, for an operation, which added 5 per cent, only to the value 
of the metal. Thus, the mint would have nothing to coin either 
on public or private account ; and the government would find a 
high ratio of profit incompatible with an extended amount of 
coinage. 

Whence it may be concluded, that the duty or seignorage upon 
coinage, which has been so frequently discussed, is an absolute 
nullity ; for that governments can not fix their own ratio of profit 
upon the execution of the coinage, but that it must depend upon 
the state of the bullion market, which again is regulated by the 
relative supplies of coined and uncoined metal, and the demand 
for them at the time being. 

It is to be observed, that, to the public at large, in its capacity 
of consumer of coined bullion, it is a matter of perfect indiffer- 
ence, whether the coin be dear or cheap; for, so long as its value 
is not subject to sudden fluctuations, it will pass current for as 
much as it has been taken for. 

When the coinage of money is not executed gratuitously, and 
especially when it is paid for at a monopoly-price, it is a matter 
of perfect indifference to the state, whether or not its coin be 
melted down or exported ; for it can neither be melted down nor 
exported, without having first paid the coinage in full, which is 
all that is lost by melting or exportation.* On the contrary, 

* The value of the coinage, or fashion of the metal, is not always lost ill 
the export. The impression is, to a certain degree, a recommendation be- 
yond the limits of the authority which executes it, and raises the valtt€i 
somewhat higher, than that of bullion in bars. 



180 ON PRODUCTION. booki. 

the export of such coin is quite as advantageous, as that of any 
other manufactured commodity whatever. It is a branch of the 
bulHon trade ; and, unquestionably, a coin, so well executed as 
to be difficult to counterfeit, accurate in the weight and assay, 
and charged with a moderate duty on the coinage, may acquire 
a currency in different parts of the world, and yield the govern- 
ment, that issues it, a profit of no contemptible amount. 

Witness the gold ducats of Holland, which are in request 
throughout all the north of Europe at a higher rate than their in- 
trinsic value as bullion ; and the dollars of Spain, which are all 
coined at Lima and Mexico, and have been executed with so much 
regularity and integrity, as to pass current as money not only 
all over Spanish America, but likewise in the United States and 
in several parts of Europe, Africa, and Asia,* 

The Spanish dollar is a remarkable instance of the value at- 
tached to the metal by the process of coinage. When the Ame- 
ricans of the Union determined upon a national coinage of dol- 
lars, they contented themselves with simply re-stamping those of 
the Spanish mint, without varying their weight or standard. But 
the piece thus re-stamped would not pass current with the Chi- 
nese, and other Asiatics, at the same rate ; 100 dollars of the 
United States would not purchase so much of other commodities 
as 100 dollars of Spain. The American Executive, neverthe- 
less, continued to deteriorate the coin by giving it a handsome 
impression, apparently wishing to avail itself of this method of 
checking the export of specie to Asia. For this purpose it was 
directed, that all exports of specie should be made in dollars of 
its own coinage, hoping in this way to make the exporters give 
a preference to the domestic products of its own territory. Thus, 
after wantonly depreciating the Spanish dollar, without prejudice, 
it is true, to the specie remaining current within the territory of 
the Union, it went on further to enjoin its use in the least profit- 
able way, viz. in the commercial intercourse with those nations, 
that set the least value on it. The natural course would have 
been, to suffer the value exported to go out of the country in the 
form, that might offer the prospect of the largest returns. Self- 
interest might have been safely relied on in this particular. (1) 

* The 5fr. pieces of France, have by their invariable uniformity ofvpeight 
and standard since their first issue, acquired a similar currency in many 
parts of the world. 



(1) This paragraph contains three errors in relation to the coinage of 
dollars by the United States, and the exportation of specie, Vvfhich it is of 
importance to point out : 1st. Spanish dollars are not, and never have been, 
simply re-stamped at our mint, without varying their weight or standard : 
2d. A pound, Troy, of Spanish dollars, contains 10 oz. 15 dwts. of fine silver : 
A pound, Troy, of American dollars contains 10 oz. 14 dwts. 5 grains of fine 
silver : 3d. No law has ever been enacted by Congress, directing the ex- 



CHAP. XXI. ON PRODUCTION. 181 

But what are we to think of the wisdom of the Spanish govern- 
ment, which was enabled by the confidence in its good faith in 
the execution of its coinage, to export dollars with a profit, and 
sell them abroad at an advance upon their intrinsic value ; and 
yet thought fit to prohibit so advantageous a traffic, which would 
h ive furnished a vent to a product of the national soil, worked 
up by domestic industry for an ample recompense? 

Though a government be the exclusive coiner of money, and 
is by no means bound to coin gratuitously, it can not with justice 
deduct the expense of coinage from its payments, in discharge 
of its own contracts. If it has engaged to pay a million, say 
for supplies advanced, it can not honestly say to the contractor : 
" We bargained to pay a million, but we pay you in specie just 
coined; and therefore shall deduct 20,000 /r., more or less, 
for the charges of coinage." In fact, ail pecuniary engagements, 
contracted by government or individuals, virtually imply a pro- 
mise to pay a given sum, not in bullion but in coin. The act of 
exchange, wherein the bargain originated, is effected with the 
implied condition, on behalf of one of the contracting parties, to 
give a commodity somewhat more valuable than silver bullion ; 
namely, silver in crown pieces, or coin of some denomination or 
other. The virtual contract of government is to pay in coined 
money ; and since, in consequence of that implied condition, it 
obtains a greater quantity of goods, than it will, if the bargain be 
to pay in bullion. In this instance, it offers the charge of coin- 
age into the bargain at the time of concluding the contract, and 
thereby obtains better terms, than if it is in the habit of paying 
in bullion. 

The charges of coinage should be deducted from the metal 
brought to the mint to be coined, at the time of its re-delivery 
in a coined state. 

These considerations lead us to the necessary conclusions, 
— that the manufacture of bullion into coin increases the value of 
the metal, in the ratio of the additional convenience resulting to 
the community, from the circumstance of coinage, and not an 
item further, whatever charges or duties the state may attempt to 
saddle it with;* that a government, by monopolizing the business 
of coining, may make a profit to the whole extent of this acces- 

* In Spanish America, a higher duty is charged, amounting according to 
Humboldt to 11 1-2 per cent, on silver, and 3 per cent, on gold, over and 
above the actual charges of coinage ; for the government allows no bullion to 
be exported in an uncoined state. So that, in fact, this is not a seignorage, 
but a duty on exportation, exacted at the time of converting the bullion 
into coin. 



portation of specie to be made in dollars of our own coinage ; nor has the 
executive the power to regulate, or in any manner interfere with the export- 
ation of specie from the United States. American Editor. 



182 ON PRODUCTION. book i. 

sion of value ; that it can not possibly advance this profit any fur- 
ther, in its discharge of engagements, fairly and freely entered 
into ; and that it can not do so with regard to prior engagements, 
without committing an act of partial bankruptcy. 

Moreover, it is evident, that, in all dealings between individu- 
als, the public authority has still less power, by means of the im- 
pression of its die, to make the commodity, acting as money, pass 
for more than its intrinsic value, jjlus the value added by the fa- 
shion it receives. Vain will be any enactment, that the stamp 
impressed shall give to an ounce of silver a specific or determi- 
nate value; it v^ill never buy more goods, than an ounce of sil- 
ver, bearing that impression, is worth at the time being. 



SECTION V. 

Of Jllterations of the Standard JWoney. 

The first thing to be observed on this head is, that the public 
authority has generally taken upon itself to fix arbitrarily the 
commodity, that shall serve as money. This assumption, on its 
part, has little inconvenience in itself; for the interests of the na- 
tion and of the ruling power happen to be exactly the same. 
Should a government attempt to force an ill-adapted medium in- 
to circulation, it would sustain a loss itself on every bargain, and 
the people would, by degrees, adopt some other medium. Thus, 
the first issue of coined money among the Romans was by tlieir 
King Numa, and his coinage was of copper, which at that time 
of day was the properest metal for the purpose; for, before the 
time of Numa, the Romans knew no other money but copper in 
bars. On the same principle, modern governments have made 
choice of gold and silver, which would undoubtedly have been 
selected by the general accord of individuals, without the inter- 
ference of their rulers. 

But the sovereign power, being firmly persuaded, that its man- 
date was necessary and competent to invest any commodity what- 
ever with the currency of money, succeeded in impressing its 
subjects with the same notion during the darker ages, and that 
too at the very time, that individuals, with a view to personal in- 
terest, were acting upon principles diametrically opposite; for, 
whoever was dissatisfied with the authorized money, either ab- 
stained from selling altogether, or disposed of his goods in some 
other way. 

This error led to another of much more serious mischief, that 
has overset all order whatever. 

The public authority persuaded itself, that it could raise or de- 
press the value of money at pleasure ; and that, on every exchange 
of goods for money, the value of the goods adjusted itself to the 



ciup. XXI. ON PRODUCTION. 183 

imaginary value, which it pleased authority to affix to it, and not 
to the value naturally attached to the agent of exchange, money, 
by the conflicting influence of demand and supply. 

Thus, when Philip I. of France, adulterated the livre of Char- 
lemagne, containing 12 oz. of fine silver,* and mixed with it a 
third part alloy, but still continued to call it a livre, though con- 
taining but 8 oz. of tine silver, he was nevertheless fully persuad- 
ed, that his adulterated livre was worth quite as much as the li- 
vre of his predecessors. Yet, it was really worth 1-3 less than 
the livre of Charlemagne. A livre in coin would purchase but 
2-3 of what it had done before. However, the creditors of the 
monarch, and of individuals, got paid but 2-3 of their just claims; 
land-owners received from their tenants but 2-3 of their former 
revenue, till the renewal of leases placed matters on a more equi- 
table footing. Abundance of injustice was committed and au- 
thorized : but, after all, it was impossible to make 8 oz. of fine 
silver equal to 12. j" 

In the year 1113, the livre, as it was still called, contained no 
more than 6 oz. of fine silver. At the commencement of the 
reign of Louis VIL it had been reduced to 4 oz. St. Louis gave 
the name of livre to a quantity of silver weighing but 2 oz. 6 gros. 
6 grains. J At the era of the French revolution, the money 
bearing that name weighed only the 1-6 of an oz. ; so that it had 
been reduced to 1-72 of its original standard of weight or quality 
in the days of Charlemagne. 

I take no notice, at present, of the great fall experienced in 
the relative value of fine silver to commodities at large, which 
has been reduced so low as 1-4 of its former amount ; but this 
is foreign to the subject of the present section, and I shall take 
occasion to speak of it herereafter. 

Thus the term, livre tournois, has at different times been ap- 
plied to very different quantities of fine silver. The alteration 
has been effected, sometimes by reducing the size and weight of 
the coin bearing that denomination, sometimes by deteriorating 
the standard of quality, that is to say, mixing up a larger portion 
of alloy, and a smaller one of pure metal; and, sometimes, by 

* The measure of weight called a livre contained 12 oz. in the time of 
Charlemagne. 

t According to the principles established supra Sect. 3. of this Chapter, 
there is reason to believe, that the value of the adulterated livre of 8 oz. of 
fine silver might have been kept up to that of the old livre of 12 oz., if the 
volume of the coin had not been augmented. But the rise of money prices, 
consequent upon the adulteration of the coin, is a ground of presumption, 
that the government, with a view to profit by this monetary operation, or- 
dered a re-coinage, and made 12 pieces out of 8, by the addition of alloy, 
so as to increase the total quantity proportionately to the reduction of the 
standard of quality. 

\ We find in the Prolegomenes of Le Blanc, 25, that the silver sol of St. 
Louis weighed 1 gros. 7 1-2 grains which, multiplied by 20, makes 2 oz. 6 
gros. 6 grains, the livre. 



184 ON PRODUCTION. book i. 

raising the denomination of a specific coin ; making, for instance, 
what was before a 2 fr, piece pass under the name of one of S/r. 
As no account is ever taken of any thing but the pure silver, 
which is the only valuable substance in silver coin, all these ex- 
pedients have had a similar effect; for this reason; that they all, 
in fact, reduced the quantity of silver contained in what was call- 
ed a livre tournois. And this is what all French writers, in com- 
pliment to the royal ordinances, have dignified by the term, rais- 
ing the standard; on the ground, thiit the nominal value of the 
coin is raised by these operations; which mi<^ht, with much more 
propriety, be said to lower the standard, since the metal, which 
alone constitutes the money, is thereby reduced in quantity. 

Though the quantity of metal in the livre has been continual- 
ly decreasing from the days of Charlemagne till the present pe- 
riod, many of our monarchs have, at different times, adopted a 
contrary course, and advanced the weight and standard of quali- 
ty, particularly since the reign of St. Louis. The motives for 
deterioration are evident enough: it is extremely convenient to 
pay one's debts with less money than one borrowed. But kings 
are not only debtors ; they are very frequently creditors too. In 
the matter of taxation, they stand precisely in the same relative 
position to the subject, as landlords to their tenants. Now, if 
every body be enabled by law to pay their debts and discharge 
their contracts with a less amount of silver than bargained for, 
the subject, of course, can pay his taxes, and the tenant his rent, 
. with a smaller quantity of that metal. And, although the king 
received less silver, yet he continued to spend as much as be- 
fore ; for the nominal price of commodities rose, in proportion 
to the diminution of metal in the coin. When what was before 
^ fr. was declared by law to be 4/r. the government was obliged 
to pay 'ifr. where it before paid but 3/r. ; so that it was neces- 
sary, either to increase the old, or to impose new taxes; in other 
words, the government, to obtain the same quantity of fine silver, 
was obliged to demand a greater number of livres from the sub- 
ject. This course, however, was always odious, even when it 
really made no difference in the real pressure of taxation, and 
was often quite impracticable. Recourse was, therefore, had to 
restoration of the coin to the higher standard. The livre being 
made to contain a greater weight of silver, the nation really paid 
more silver in paying the same number of livres.* Thus we 
find, that the ameliorations of the coin commence nearly about 
the same period, as the establishment of permanent taxation. — 

* The same expedient was resorted to by that monster of prodigality, 
the Roman emperor Heliogabalus. The taxes of the empire were payable 
in specific gold coin, called aurei, and not in gold by the tale : and the em- 
peror to enlarge his receipts made a new issue of aurei, weighing as much 
as 24 oz. each. The virtuous Alexander Severus, actuated by an opposite 
motive, made a considerable reduction of the weight. 



CHAP. XXI. ON PRODUCTION. 135 

Before that innovation, the monarch had no personal motive for 
increasing the intrinsic value of the coin he issued. 

It would be a great mistake to suppose, that the frequent va- 
riations of standard alluded to, were effected in the same clear 
and inteUigible manner, which I have adopted to explain them. 
Sometimes the alteration, instead of being openly avowed, was 
kept secret as long as possible;* and this attempt at conceal- 
ment gave occasion to the barbarous technical jargon used in 
this branch of manufacture. At other times, one denomination 
of coin was altered, while the rest were left untouched; so that, 
at a given period, a Im'e, paid in one denomination, contained 
more silver than if it paid in another. Finally, to throw the mat- 
ter in still greater obscurity, the subject was commonly forced to 
reckon up his accounts, sometimes in livres and sous, sometimes 
in crowns, and to pay in coin representing neither livre, sol, nor 
crown, but either fractions or multiples of these several denomi- 
nations. Princes, that resort to such pettifogging expedients, 
can be viewed in no other light, than as counterfeiters armed 
with public authority. 

The injurious effect of such measures upon credit, commercial 
integrity, industry, and all the sources of prosperity, may be easi- 
ly conceived; indeed, it was so serious, that, at several periods 
of our history, the monetary operations of the state suspended 
all commerce whatever. Phihp le Bel drove all foreigners out 
of the fairs of France, by compelling them to receive his discre- 
dited coin in payment, and prohibiting the making of bargains in 
a coin of better credit-f Philip de Valois did the same thing 
with respect to the gold coin, and with precisely the same result. 
A cotemporary chroniclerj informs us, that almost all foreign 
merchants discontinued their dealings with France; that the 
French traders themselves, ruined by the frequent alterations of 
the coin, and the consequent uncertainty of values, withdrew to 
other countries; and that the rest of the king's subjects, both no- 
ble and bourgeois, were equally impoverished with the merchants; 
for which reason, the annalist adds simply enough, the king was 
not at all beloved. 

The examples I have cited are taken from the monetary sys- 
tem of France; but similar expedients have been practised in 
almost every nation, ancient or modern. Popular forms of go- 

* Philip de Valois, in his official instructions to the officers of the mint, 
A. D. 1350, enjoins the utmost secrecy on the subject of the purposed adul- 
teration, even with the sanction of an oath, for the express purpose of tak- 
ing in the commercial classes : directing them " to put a good face upon 
the matter of the course of exchange of the mark of gold, so that the in- 
tended adulteration might not be discovered." Many similar instances are 
to be met with in the reign of King John. Le Blanc, TraiU Hist, des 
Monnaies, p. 251. 

t Le Blanc, Traite Hist, des Monnaies, p. 27. 

X Matthieu Villani. 

32 



186 ON PRODUCTION. book i. 

vernment have been equally culpable with those of a despotic 
character. The Romans, during the most glorious periods of 
the republic, effected a national bankruptcy more than once, by 
deteriorating the intrinsic value of their coin. In the course of 
the first Punic war, the as, which was originally 12 oz. of copper, 
was reduced to 2 oz.; and, in the second Punic, was again low- 
ered to 1 oz.* 

In the year 1722, the state of Pennsylvania, which acted, in 
this particular, as an independent government, even before the 
American war, passed a law, enacting, that IL sterling should 
pass for 1/. 5s. ;| and the United States, and France also, after 
declaring themselves republics, have both gone still further. 

"It would require a separate treatise," says Steuart, " to in- 
vestigate all the artifices which have been contrived to make 
mankind lose sight of the principles of money, in order to palliate 
and make this power in the sovereign to change the value of the 
coin appear reasonable. "J He might have added, that such a 
volume would be of little practical service, and by no means pre- 
vent the speedy adoption of some new device of the same kind. 
The only effectual preventive would be, the exposure of the cor- 
rupt system, that engenders such abuses; were that system ren- 
dered simple and intelligible, every abuse would be detected and 
extinguished in the outset. 

And let no governments imagine, that, to strip them of the pow- 
er of defrauding their subjects, is to deprive them of a valuable 
privilege. A system of swindling can never be long-lived, and 
must infallibly in the end produce much more loss than profit. 
The feeling of personal interest is that which soonest awakens the 
intellectual faculties of mankind, and sharpens the dullest appre- 
hensions. Wherefore, in matters affecting personal interest, a 
government has the least chance of outwitting its subjects. In- 
dividuals are not easily duped by measures tending to procure 
supplies to the state in an under-hand manner: and although 
they can not guard against direct outrage, or breach of public 
faith, yet it can never long escape their penetration, however 
artfully disguised and concealed. The government will acquire 
a character for cunning as well as faithlessness, and will lose en- 
tirely the powerful engine of credit, which will operate with in- 
finitely more efficacy, than the mere trifle that fraud can procure. 
Yet, evfen that trifle will often be wholly engrossed by the agents 
of government, who are sure to turn every act of injustice to- 
wards the subject to their own private advantage. Thus, while 
the government loses its credit, its agents get all the profit; and 
the public authority is disgraced, for no other purpose, than to 
enrich its menials. 

* Montesquieu, Esprit des Lois, liv. xxii. c. 11. 

+ Smith's Wealth of Nations, book ii. c. 2. 

t Steuart's Inquiry into the Princ. Pol, Econ. 8vo. 1805, vol. ii. p. 306. 



CHAP. XXI. ON PRODUCTION. 187 

The real interest of a government is, to look not to fictitious, 
disgraceful, and destructive resources, but to such as are really 
prolific and inexhaustible; and one can render it no better ser- 
vice, than to expose and render abortive those of the former kind, 
and point out to it those of the latter. 

The immediate consequence of a deterioration of the coin is, 
a proportionate reduction of all debts and obligations payable in 
money; of all perpetual or redeemable rent-charges, whether 
upon the state or upon individuals; of all salaries, pensions, and 
rack-rents; in short, of all values previously expressed in money; 
by which reduction, the debtor gains what the creditor loses. It 
is a legal authorization of a partial bankruptcy, or compromise, 
by every money-debtor with his creditor, for a sum less than his 
fair claim, in the ratio of the diminution of precious metal in the 
same denomination of coin. 

Thus, whatever government has recourse to this expedient is 
not content with giving itself an illegitimate advantage, but urges 
all other debtors to do so likewise. 

The kings of France, however, have not always allowed their 
subjects to reap the same advantage in their private concerns, 
which the monarch proposed to himself by the operation of in- 
creasing or diminishing the quantity of metal contained in a par- 
ticular denomination of coin. Their personal motive was, on all 
such occasions, to pay less, or receive more silver or gold them- 
selves, than in honesty they ought; but they sometimes compell- 
ed individuals, notwithstanding thfc alteration, to pay and receive 
in the old coin, or, if in the new, at the current rate of exchange 
between the two.* This was a close copy of a Roman prece- 
dent. When that republic, in the second Punic war, reduced 
the as of copper from two oz. to one, the republic paid its credi- 
tors! as instead of two, that is to say, 50 per cent, on their 
claims. But private accounts were kept in denarii; and the 
denarius, which till then was worth 10 asses, was, by law, made 
to pass for 16 asses; so that individuals paid 16 asses or oz. of 
copper only for every denarius, instead of paying 20 as they 
should have done to fulfil their engagements, that is to say, 10 
asses of 2 oz. or 20 of 1 oz. each, for every denarius. Thus, the 
republic paid a dividend of 50 per cent, only, but compelled pri- 
vate persons to pay one of 80 per cent. 

A bankruptcy, effected by deterioration of the coin, has been 
sometimes considered in the light of a plain and simple bank- 
ruptcy, or mere reduction of the public debt. It has been thought 
less injurious to the public creditor to pay him in adulterated 
coin, that he again may pay over at the same rate, as he receives 
it, than to curtail his claim by ^, \, or in any other proportion. 
Let us see how the two methods differ. 

* Vide the several ordinances of Philip le Bel in 1303 ; of Philip de Va- 
lois in 1329 and 1343; of John in 1354; andof Charles VI. in 1421. 



188 ON PRODUCTION. book i. 

In either case, the creditor is equally a loser in all his pur- 
chases posterior to the bankruptcy. Whether his income be 
abridged by one-half, or whether we find himself obliged to pay 
for every thing twice as dear as before, is to him precisely the 
same thing. 

As to ail his own existing debts, he may undoubtedly get rid 
of them on the same terms as the public has discharged his own 
claim; but what ground is there for supposing, that the public 
creditors are always in arrear in their private accounts with the 
rest of the community? They stand in the same relation to so- 
ciety as all other classes ; and there is every reason to believe, 
that the public creditors have as much owing to them by one set 
of individuals as they owe themselves to another; in short, that 
the accounts will square. Thus, the injustice they do to their 
private claimants is balanced by the injury they receive; and a 
bankruptcy, in the shape of a deterioration of the coin, is to them 
full as bad, as in any other shape. 

But it is attended with other serious evils, destructive of na- 
tional welfare and prosperity. 

It occasions a violent dislocation of the money-prices of com- 
modities, operating in a thousand different ways, according to 
the particular circumstances of each respectively, and thereby 
disconcerting the best planned and most useful speculations, and 
destroying all confidence between lender and borrower. Nobody 
will willingly lend when he runs the risk of receiving a less sum 
than he has advanced; nor will any one be in a hurry to borrow, 
if he is in danger of paying more than he gets. Capital is, con- 
sequently, diverted from productive investment; and the blow, 
given to production by deterioration of the coin, is commonly 
followed up by the still more fatal ones of taxation upon commo- 
dities, and the establishment of a maximum of price. 

Nor is the effect less serious in respect to national morality. 
People's ideas of value are kept in a state of confusion for a 
length of time, during which knavery has an advantage over ho- 
nest simplicity, in the conduct of pecuniary matters. Moreover, 
robbery and spoliation are sanctioned by public practice and ex- 
ample; personal interest is set in opposition to integrity; and 
the voice of the law to the impulse of conscience. 



SECTION VI. 

Of the reason why JWoney is neither a Sign nor a JVleasure. 

Money would be a mere sign or representative, had it no in- 
trinsic value of its own; but, on the contrary, whenever it is em- 
ployed in sale or purchase, its intrinsic value alone is consider- 
ed. When an article is sold for a 5/r. piece, it is not the impres- 



CHAP. XXI. ON PRODUCTION. 189 

sion or the name, that is given or taken in exchange, but the 
quantity of silver, that is known to be contained in it. As a 
proof of the truth of this position, if the government were to issue 
crown pieces made of tin or pewter, they would not be worth so 
much as those of silver. Though declared by law to be of equal 
value, a great many more of them would be required in purchase 
of the same commodities; which could not happen, if they were 
nothing but a mere sign. 

Violence, ingenuity, or extraordinary political circumstances, 
have sometimes kept up the current value of a money, after a 
reduction of its intrinsic value ; but not for any length of time. 
Personal interest very soon finds out whether more value is paid 
than is received, and contrives some expedient to avoid the loss 
of an unequal and unfair exchange. Even when the absolute 
necessity of finding some medium of circulation of value obliges 
a government to invest with value an agent, destitute either of 
intrinsic value or substantial guarantee, the value attached to the 
sign by this demand for a medium, is actual value, originating in 
utility, and makes it a substantive object of traffic. A bank of 
England note is of no value whatever as a representative; for it 
really represents nothing, and is a mere promise without securi- 
ty, given by a bank, v/hich has advanced it to the government 
without any security; yet this note is, by its mere utility, pos- 
sessed of its positive value in England, as a piece of gold or sil- 
ver. 

But a bank-note, payable on demand, is the representative, the 
sign, of the silver or specie, which may be had whenever it is 
wanted, on presenting the note. The money or specie, which 
the bank gives for it, is not the representative, but the thing re- 
presented. 

When a man sells any commodity, he exchanges it, not for a 
sign or representative, but for another commodity called money, 
which he supposes to posses a value equal to the value sold. 
When he buys, he does so, not with a sign or representative, but 
with a commodity of real, substantial value, equivalent to the va- 
lue received. 

A radical error, in this particular, has given rise to another of 
very general prevalence. Money having been pronounced to be 
the sign of all values whatever, it was boldly inferred, that, in 
every country, the total value of the money, bank and other notes, 
and credit paper, is equal to the total value of all other commodi- 
ties. A position, that derives some show of plausibility, from the 
circumstance, that the relative value of money declines when its 
quantity is increased, and advances when that quantity is dimi- 
nished. 

It is obvious, however, that the same fluctuation affects all other 
commodities whatever. If the vintage be twice as productive 
one year as it is another year, the price of wine falls to half what 



190 ON PRODUCTION. book i. 

it was the year preceding. In like manner, one may readily con- 
cede, that, should the aggregate of circulating specie be doubled, 
the prices of all goods would be doubled also ; in other words, 
twice the quantity of specie would go to the purchase of the same 
articles. But this consequence by no means proves, that the to- 
tal value of the circulating medium is always equal to the sum to- 
tal of all the other items of wealth, any more, than that the sum 
total of the produce of the vintage is equal to the totality of other 
values. The casual fluctuation in the value of silver and of wine, 
in the cases supposed, is the effect of a difference in quantity of 
these respective commodities at two different times, and has no- 
thing to do with the quantity of other commodities. 

It has been already remarked, that the total value of the mo- 
ney of any country, even with the addition to the value of all the 
precious metals contained in the nation under any other shape, 
is but an atom, compared with the gross amount of other values. 
Wherefore, the thing represented would exceed in value the re- 
presentative ; and the latter could not command the presence or 
possession of the former.* 

Nor is the position of Montesquieu, that money-price depends 
upon the relative quantity of the total commodities, to that of the 
total money of the nation| at all better founded. What do sell- 
ers and buyers know of the existence of any other commodities, 
but those, that are the objects of their dealing? And what differ- 
ence could such knowledge make in the demand and supply in 
respect to those particular commodities 1 These opinions have 
originated in the ignorance at once of fact and of principle. 

Money or specif has with more plausibility, but in reality with 
no better ground of truth, been pronounced to be a measure of 
value. Value may be estimated in the way of price ; but it can 
not be measured, that is to say, compared with a known and in- 
variable measure of intensity, for no such measure has yet been 
discovered. 

Authority, however absolute, can never succeed in fixing the 
general ratio of value. It may enact, that John, the owner of a 
sack of wheat, shall give it to Richard for 24/r. ; and so it may 
that John shall give his sack of wheat for nothing. This enact- 
ment will probably rob John to benefit Richard ; but it can no 
more make 24/r. the exact measure of the value of a sack of 

* If credit-paper be thrown into the scale, it will not help us over this 
difficulty. The agent of circulation, whether in the form of specie or of 
paper, can never exceed in amount the total utility vested in it. The ex- 
pansion of the volume of a national money, whether of metal or of paper, 
is sure to be followed by a proportionate dilution of its value, which disables 
the whole from being equal to the purchase of a greater portion of commo- 
dities at large : and the value, devoted to the business of circulation, is al- 
ways a trifle, compared with the value it is employed to circulate. Vide 
infra, under the head of Bank-notes. 

t Esprit des Loia, liv. xxii. c. 7. 



CHAP. XXI. ON PRODUCTION. 191 

wheat, than it can make a sack of wheat worth nothing, by order- 
ing it to be given for nothing. 

A yard or a foot is a real measure of length ; it always presents 
to the mind the idea of the self-same degree of length. No mat- 
ter in what part of the world a man may be, he is quite sure, that 
a man of 6 feet high in one place is as tall as a man of 6 feet 
high in another. When I am told that the great pyramid of 
Ghaizi is 100 toises square at the base, I can measure a space 
100 loises square at Paris, or elsewhere, and form an exact no- 
tion of the space the pyramid will cover; but when 1 am told, 
that a camel is at Cairo worth 50 sequins, that is to say, about 
2500 grammes of silver, or 500/r. in coin, I can form no precise 
notion of the value of the camel ; because, although I may have 
every reason to believe, that 500/r. are worth less at Paris than 
at Cairo, I can not tell what may be the difference '^f value. 

The utmost, therefore, that can be done is, merely to estimate 
or reckon the relative value of commodities; in other words, to 
declare, that at a given time and place, one commodity is worth 
more or less than another; their positive vai\ue it is impossible 
to determine. A house may be said to be worth 20,000/r. ; but 
what idea does that sum present to the mindl The idea of what- 
ever I can purchase with it ; which is, in fact, as much as to say, 
the idea of value equivalent to the house, and not of value of any 
fixed degree of intensity, or independent of comparison between 
one commodity and another. 

When two objects of unequal valufi arc both compared to dif- 
ferent portions of one specific product, still it is a mere estimate 
of relative value. One house is said to be worth 20,000/r. an- 
other 10,000 /r.; which is simply saying, the former is worth 
two of the latter. It is true, that, when both are compared to 
a product capable of separation into equal portions, as money is, 
a more accurate idea can be formed of the relative value of one 
to the other ; for the mind has no difficulty in conceiving the re- 
lation of 2 integers to 1, or 20,000 to 10,000. But any attempt 
to form an abstract notion of the value of one of these integers 
must be abortive. 

If this be all that is meant by the term, measure of value, 
I admit that money is such a measure ; but so, it should be ob- 
served, is every other divisible commodity, though not employed 
in the character of money. The ratio of the one house to the 
other will be equally intelligible, if one be said to be worth 1000, 
and the other only 500, quarters of wheat. 

Nor will this measure of relative value, if we may so call it, 
convey an accurate idea of the ratio of two commodities one to 
the other, at any considerable distance of time or place. The 
1000 quarters of wheat, or 20,000 fr., will not be of any use in 
the comparison of a house in former, with a house in the present 
times ; for the value of silver coin and of wheat have both varied 



192 ON PRODUCTION. book r. 

in the interim. A house at Paris, worth 10,000 crowns in the 
days of Henry IV., would now be worth a great deal more, than 
another of that value now-a-days. So likewise one in Lower 
Britany, worth 20,000 fr., is of much more value than one of 
that price at Paris; for the same reason, that an income of 10,000 
fr. is a much larger one in Britany than at Paris. 

Wherefore, it is impossible to succeed in comparing the wealth 
of different eras or different nations. This, in political economy, 
like squaring the circle in mathematics, is impracticable, for want 
of a common mean or measure to go by. 

Silver, and coin too, whatever be its material, is a commodity, 
whose value is arbitrary and variable, like that of commodities 
in general, and is regulated on every bargain by the mutual ac- 
cord of the buyer and seller. Silver is more valuable, when it 
will purchase a large quantity of commodities, than when it will 
purchase a smaller quantity. It can not, therefore, serve as a 
measure, the first requisite of which is invariability. Thus, in the 
assertion of Montesquieu, when speaking of money, that "what 
is the common measure of all things, should of all things be the 
least subject to change,"* there are no less than three errors in 
two lines. For, in the first place, it has never been pretended, 
that money is the measure of all things, but merely that it is the 
measure of values; secondly, it is not even the measure of va- 
lues ; and lastly, its value can not be made invariable. If it was 
the object of Montesquieu to deter governments from altering 
the standard of their coin, he should have laboured to enforce 
those sound arguments, which the question would fairly have 
supplied him with, instead of dealing in brilliant expressions, 
which serve to mislead and give currency to error. 

It would, however, often be a matter of curiosity, and some- 
times even of utility, to be able to compare two values at an in- 
terval of time or place ; as, for instance, when there is occasion 
to stipulate for a payment at a distant place, or a rent for a long 
prospective term. 

Smith recommends the value of labour as a less variable, and, 
consequently, more appropriate, measure of absent or distant 
value ; he reasons thus upon the matter : " Equal quantities of 
labour, at all times and places, may be said to be of equal value 
to the labourer. In his ordinary state of health, strength, and 
spirits, in the ordinary degree of his skill and dexterity, he must 
always lay down the same portion of his ease, his liberty, and 
his happiness. The price, which he pays, must always be the 
same, whatever may be the quantity of goods which he receives 
in return for it. Of them, indeed, it may sometimes purchase 
a greater and sometimes a smaller quantity ; but it is their value 
which varies, not that of the labour which purchases them. At 

* Esprit des Lois, liv. xxii. c. 3. 



CHAP. XXI. ON PRODUCTION. 193 

all times and places, that is dear, which it is difficult to come at, 
or which it costs much labour to acquire ; and that cheap, which 
is to be had easily, or with very little labour. Labour alone, 
therefore, never varying in its own value, is alone the ultimate 
and real standard, by which the value of all commodities can at 
all times and places be estimated and compared."* 

With great deference to so able a writer, it by no means fol- 
lows, that, because labour in the same degree is always to the 
labourer himself of the same value, therefore it must always bear 
the same value as an object of exchange. Labour, like commo- 
dities, may vary in the supply and demand ; and its value, like 
value in general, is determined by the mutual accord of the ad- 
verse interests of buyer and seller, and fluctuates accordingly. 

The value of labour is affected materially by its quality. The 
labour of a strong and intelligent person is worth much more, 
than that of a weak and ignorant one. Again, labour is more 
valuable in a thriving community, where there is a lively demand 
for it, than in a country overloaded with population. In the 
United States, the daily wages of an artificer amount in silver to 
three times as much as in France. f Are we to infer, that silver 
has then but -} of its value in France 1 The artificer is there 
better fed, better clothed, and better lodged; which is a convinc- 
ing proof, that he is really better paid. Labour is probably one 
of the most fluctuating of values, because at times it is in great 
request, and at others is offered with that distressing importunity 
occasionally witnessed in cities where industry is on the decline. 

Its value has, therefore, no better title to act as a measure of 
two values at great distances of time or place, than that of any 
other commodity. There is, in fact, no such thing as a measure 
of value, because there is nothing possessed of the indispensable 
requisite, invariability of value. 

In the absence of an exact measure, we must be content to 

* Wealth of Nations, book i. c. 5. On this point, Smith observes, that 
" labour was the first price, the original purchase-money, that was paid for 
all things. It was not by gold or silver, but by labour, that all the wealth 
of the world was originally purchased." I think I have succeeded in prov- 
ing that he is mistaken. Nature executes an essential part of the produc- 
tion of values; and her agency is in most cases paid for, and forms a portion 
of the value of the product. The profit of land, which is called rent, is paid 
to the proprietor, who does nothing himself, and stands in place of the ori- 
ginal occupant ; and it affects the value of the product, raised by the joint 
agency of nature and industry : the portion of value contributed by nature 
is not the product of human labour. Capital also, which is, for the most 
part, the accumulated product of labour, concurs, like nature, in the busi- 
ness of production, and receives in recompense a portion of the product ; 
but the gains, accruing to the capitalist, are quite distinct from the accu- 
mulated labour vested in the capital itself, which can be expended or con- 
sumed in toto, by one set of persons; while its share in the product, in other 
words, the interest paid for its use, may be consumed by another. 

i Humboldt reckons it at from 3/r. 50 cents, to 4/r. of our money. Essai 
Pol. sur la Nouvelle Espagne, tom. iii. p. 105. oct. ed. 

33 



194 ON PRODUCTrON. book i 

approximate to accuracy ; and, to this end, many commodities 
of well known value will serve to give a notion, more or less 
correct, of the value of any specific product. At the same point 
of time and place, there is little difficulty in the approximation : 
the value of any given article may be readily measured by almost 
all others. To ascertain pretty nearly the value of an article 
amongst the ancients, we must find out some article which there 
is reason to think has subsequently undergone little change of 
value, and then compare the quantity of that article given by the 
ancients and moderns respectively, in exchange for the article in 
question. Wherefore, silk would be a bad object of comparison; 
because it was, in the time of C^sar, procurable from China 
only, at a most extravagant expense, and, being then no where 
produced in Europe, must of course have been much dearer than 
at present. Is there any commodity that has varied less in the 
intervening period 1 and, if there be any such, how much of it 
was then given for an ounce of silk 1 These are the two points 
we must inquire into. If any one article can be discovered, that 
was produced with equal ease and perfection at the two periods, 
and the consumption of which had a natural tendency to keep 
pace with its abundance, this article would probably have varied 
little in value, and may be taken as a tolerable measure of other 
values. 

Ever since the earliest times recorded in history, wheat has 
been the staple food of the great mass of the population, in all 
the principal nations of Europe ; consequently, their relative 
population must have been influenced by the abundance or scar- 
city of this article of food, more than of any other : the ratio of 
the demand to the supply must have been, therefore, at all times 
nearly the same. There is, besides, no product which I know 
of, that has undergone less alteration in the costs of production. 
The agricultural skill of the ancients was in most respects equal, 
and in some perhaps superior to our own. Capital, indeed, was 
dearer amongst them ; but that difference was little felt ; for, in 
ancient times, the proprietor was commonly both farmer and ca- 
pitalist ; and the capital embarked in agriculture yielded less re- 
turn than other investments ; because, as more honour was 
attached to this, than to the other branches of industry, commerce 
and manufacture, the influx of capital, as well as of labour, into that 
channel, was greater than into the other two. And, during the 
middle ages, in spite of the general declension of all the arts, 
the tillage of arable land was prosecuted with a skill little inferior 
to that of the present day. 

Whence I infer, that the same quantity of wheat must have 
borne nearly the same value among the ancients, during the 
middle ages and at the present time. But, as there has all along 
been a vast difference in the produce of the harvest in one year 
and another, grain being sometimes so abundant, as to sell ex- 



CHAP. XXI. ON PRODUCTION. 195 

tremely low, and at other limes so scarce, as to occasion famine, 
the value of grain must be taken on an average of years, when- 
ever it is made the basis of any calculation. 

So much for the estimation of values at distant periods of time. 

There is equal difficulty in the estimation at great distances of 
place. The staple articles of national food, which, as such, 
maintain the greatest uniformity in the ratio of the demand and 
supply, are very different in different climates. In Europe, 
wheat is the staple ; in Asia it is rice : the relative value of nei- 
ther the one nor the other in Asia and Europe is tolerably stea- 
dy ; nor has the value of rice in Asia any relation to the value of 
wheat in Europe. Rice is beyond question less valuable in India, 
than wheat is in this part of the world ; for, besides that the cul- 
tivation is less expensive, it yields two crops in the year. This 
is one reason, why labour is so cheap in India and China. 

The article of food in most general use is, therefore, but a bad 
measure of value at great distances of place. Nor are the pre- 
cious metals by any means a correct one: their value is indubita- 
bly not so great in North America and the West Indies, as in 
Europe, and much greater in every part of Asia, as the constant 
efflux of specie thither sufficiently proves. — Yet the frequency 
of communication between these different parts of the world, and 
the facility of transport, give us reason to suppose them the least 
liable to fluctuation of value on their passage from one climate 
and another. 

There is happily no necessity, for the purposes of commerce, 
to compare the relative value of goods and of metals in two dis- 
tant parts of the world ; it is quite enough to know their relation 
to other commodities in each country. When a merchant remits 
to China half an ounce of silver, it is of little importance to him, 
whether it has more relative value in China than in Europe. All 
he wants to know is, whether he can buy with it at Canton a 
pound of tea of a certain quality, which he can re-sell in Europe, 
say for two ounces of silver. With these data, and in expecta- 
tion of receiving, at the close of the speculation, a gross profit of 
an ounce and a half of silver, he calculates whether that profit 
will leave him a sufficient nett profit, after covering the charges 
and risk out and home ; and this is all he cares about. If, in- 
stead of bullion, he remit goods, it is enough for him to know; 1. 
the -relation between the value of these goods and silver in Eu- 
rope; that is to say, how much they will cost; 2. the relation be- 
tween their value and that of Chinese products at Canton ; that 
is to say, what he can get in exchange for them ; and, lastly, the 
relation between these latter and silver in Europe; that is to say, 
what they will be worth when imported. It is evident that every 
repetition of this operation brings into question nothing more than 
the relative value of two or more articles at the same time, and 
at the same place. 



196 ON PRODUCTION. book r. 

For the common purposes of life, or, in other words, when 
nothing more is requisite, than to compare the value of two ob- 
jects, at no great distance of time or place, most commodities 
possessed of any value at all may serve as a measure ; and if, in 
describing the value of an object, even where there is no ques- 
tion of either buying or selling, the estimation is more generally 
made in the precious metals, or in money, than in any other 
commodity, it is simply, because its value is more generally 
known, than that of other commodities.* But, in all bargains 
for a long prospective period, as for the reservation of a perpe- 
tual rent, it is more advisable to reckon in wheat : for the disco- 
very of a single mine might perhaps greatly reduce the present 
value of silver ; whereas the tillage of all North America could 
not sensibly alter the value of wheat in Europe: for the number 
of mouths to be fed in America, would increase almost in the 
ratio of the improved cultivation. But long prospective stipula- 
tions regarding value must unavoidably, under any circumstances, 
be very precarious, and can never give any certain notion of the 
value that is likely to be received. Perhaps the most improvident 
course of all is, to stipulate for a particular denomination of mo- 
ney ; for the same denomination may be fixed to any variation of 
weight or quality whatever ; and the contracting party may find 
he has bargained for a name, rather than a value, and that he 
runs the risk of paying, or being paid, in mere words. 

I have dwelt thus long upon the refutation of incorrect expres- 
sions, because they appear to have acquired too general a circu- 
lation ','f and because they often confirm people in false notions 
and ideas, which ideas sometimes serve as the basis of errone- 
ous systems, that in their turn give birth to conduct equally 
erroneous. 



SECTION VII. 

Of a Particularity, that should he attended to, in estimating the 
Sums mentioned in History. 

In reducing the money of former ages into money of the pre- 
sent day, the best informed historians have contented themselves 

* The difference of value in different objects has, throughout this work, 
been noted in money-piice, or what they v/ill fetch in money; extreme 
correctness not being necessary for illustration. Even in the exact science 
of geometry, the figures are given merely to make the demonstrations 
more intelligible ; strict accuracy is necessary in the reasoning and cqnclu- 
sions only. 

t After the appearance of three editions of this work, Sismondi published 
his Nouveaux Principes d'Econ. Pol.; wherein amongst many excellent 
chapters, there is one entitled, " Money, the sign, token, and measure of 
value." Li v. v. c. 1. 



CHAP. XXI. ON PRODUCTION. 197 

with converting the actual quantity of gold and silver, designated 
by the term made use of by the authority cited, into the current 
money of their own times. But this is not enough : the actual 
sum, the real amount of the metal, can give no correct notion of 
its then value, which is the very point we want to arrive at. It 
is, therefore, necessary to reckon besides the fluctuations of va- 
lue that the metal itself has undergone. 

A few examples will best explain my meaning : 

Voltaires tells us, in his Essay on Universal History,* that 
Charles V. enacted, that the sons of France should have an an- 
nual revenue settled on them of 12,000 limes: and, as he reckons 
this sum to be equal to 100,000 livres of the present day, he na- 
turally enough observes, that this was no great provision for the 
sons of the monarch. But let us examine the grounds for this 
calculation of Voltaire. First, he reckons that the mark of fine 
silver was, in the time of Charles V., worth about 6 livres ^ at 
this rate, 12,000 livres M'ill make 2000 marks of silver, which, at 
their relative value at the date of Voltaire's writing, would in fact 
amount to 100,000 livres, or thereabouts. But 2000 marks of 
fine silver were worth in the reign of Charles V. much more 
than in the reign of Louis XV. Of this we shall be convinced, 
by a comparison of the relative average, at the two difierent pe- 
riods, of pure silver to wheat, which we will take as one of the 
least variable. 

Dupre of St. Maur, whose bookf is an ample repository of 
learned information upon the value of commodities, gives it as 
his opinion, that, from the reign of Philip Augustus, who died 
A. D. 1223, until about the year 1520, the setier of wheat (Paris 
measure) was worth, on the average, as much as -i of a mark of 
fine silver ; i. e. about 512 grains weight. 

About the year 1536, when the mark of silver was of the va- 
lue of 13 livres tournois, or rather passed under the denomina- 
tion of 13 livres tournois, the ordinary price of a setier of wheat 
was about 3 livres tournois, i. e. ■j\ of a mark of fine silver, 
amounting to 1063 grains weight of that metal. 

In 1602, under the reign of Henry IV., the mark of fine silver 
being at that time equal to 22 livres, the average price of the se- 
tier of wheat was 9/^. 16s. 9d.; i. e. 2060 grains of fine silver.t 

Since that period, the setier of wheat has, one year with an- 
other, been constantly worth about the same weight of silver. 
In 1789, when the mark was equivalent to 54 liv. I9s. the ave- 
rage price of wheat was, according to Lavoisier, 24 liv. the setier 
i. e. 2012 grains of fine silver. I have not reckoned the frac- 
tions of grains, for in these matters it is enough to approximate 

* Edit, de Kehl, oct. torn. xVii. p. 394. 
t Rapport entre r Argent et les Denrees, p. 35. 

t For these calculations I am indebted to the Essai sur les Monnaies, and 
the Variations dans les Prix, both by Dupr4 de Saint Maur. 



19S ON PRODUCTION. book i. 

to accuracy; indeed, the price of the setier, taken at the average 
of Paris and the environs, is itself but loosely calculated. 

The result of this comparative statement is, that the setier of 
wheat, whose relative value to other commodities has varied little 
from 1520 down to the present time, has undergone great fluctu- 
ations, being worth, 

A. D. 1520 - - 512 gr. of pure silver. 
1536 - - 1063 do. do. 

1602 - - 2060 do. do. 

1789 - - 2012 do. do. 

which shows, that the value of pure silver must have varied con- 
siderably since the first of these dates ; inasmuch as, on every 
act of exchange, four times as much of it must now be given for 
the same quantity of commodities, as was given three centuries 
ago. We shall see by-and-by,* why the discovery of the Ame- 
rican mines, and the influx into the market of about ten times as 
much silver as before, has operated to reduce its value only in 
the ratio of 4 to 1. 

Now to the application of this information to the royal stipend 
in question : if pure silver was worth in the time of Charles V. 
four times as much as in the age of Voltaire, the settlement of 
2000 marks upon the sons of France was equivalent to 8000 
marks at the present, that is to say, more than 400,000 /r. of 
our present currency ; which makes the observation of Voltaire 
upon the inadequacy of the provision much less applicable. 

Raynal, though he wrote avowedly upon commercial matters, 
has committed a similar error, in estimating the public revenue 
in the reign of Louis XII. at 36 millions of our present money 
(francs) on the ground, that it amounted to 7,650,000 liv. of 11 
liv. to the mark of silver. This sum, indeed, was equal tp 
695,454 marks of silver: but it would not be enough merely to 
reduce the mark into livres of the present day ; for the same 
quantity of silver was then worth four times as much as it is now : 
so that, before reducing them into modern money, they should 
be multiplied by four, which will swell the public revenue under 
Louis XII. to a sum of 144 millions of francs of present cur- 
rency. 

Again, we read in Suetonius, that Caesar made ServiHus a pre- 
sent of a pearl worth 6 millions of sestertii, which his translators, 
La Harpe and Levesque, estimate to be equal to 1,200,000 /n 
present money. But a little lower down, we find, that Ccesar, 
on his return to Italy, disposed of the gold bullion, accruing from 
the plunder of Gaul, for coin, at the rate of 3000 sestertii to the 
pound of gold ; which shows the pearl of Servilius to have been 
much under-rated. The Roman pound, according to Le Blanc, 
weighed 10 2-3 of our ounces; and 10 2-3 oz. of gold in Caesar's 

* Book II. Chap. 4. 



CHAP. XXI. ON PRODUCTION. 199 

time, were worth as much as 32 ounces of that metal at the pre- 
sent day : for it iTiay reasonably be reckoned, that the vakie of 
gold has fallen in the ratio of 3 to 1.* Now 32 oz. of gold are 
worth nearly 3036 /r., which may therefore be looked upon as 
about the real value of 3000 sestertii : at which rate, the pearl in 
question must have been worth 6,072,000 fr. and the Roman 
sestertius, somewhat more than a. franc of our money; which is 
greatly beyond the ordinary estimate. | 

When Csesar laid hands upon the public treasures of Rome, 
in spite of the opposition of the tribune Metellus, he is stated to 
have found them to consist of 4130 lbs. of gold, and 80,000 lbs. 
of silver; which Vertot estimates to have amounted to 2,911,100 
liv. tourn.; but upon what grounds I am at a loss to imagine. To 
form a tolerably correct notion of the treasure seized by Csesar 
upon his usurpation, the 4130 lbs. of gold should be reduced into 
oz. of the French standard, at the rate of 10 2-3 oz. to the Ro- 
man lb. J which makes 44,052 oz. But, as the same weight of 
gold was then worth three times as much as at present, the value 
will appear to have been 132,156 oz. or 12,530,346 /r., suppos- 
ing the standard of quality in the gold to have been the same as 
at present. The 80,000 lbs. weight of silver also were then 
worth as much as 320,000 lbs. at the present period, i. e. 
20,915, 735/r., reckoning the Roman lb. at 10 2-3 oz., and tak- 
ing the standard of quality to have been the same. Wherefore, 
the sum appropriated by the usurper amounted to 33,446,081 /r. 

* 12 oz. of silver were given for one oz. of gold, in Csesar's time. Where- 
fore, silver having fallen in the ratio of 4 to 1, 1 oz. of gold was worth as 
much in his days, as 48 oz. of pure silver at the present period. But 48 oz. 
of silver are now worth 3 oz. of gold, or thereabouts : so that gold must 
have fallen in the ratio of about 3 to 1. 

t The same error of calculation has led these translators involuntarily to 
under-rate the prodigality of the worst of the emperors. Thus we are told, 
that Caligula, in less than a year, squandered the whole of the treasure ac- 
cumulated by Tiberius, amounting to 2700 millions of sestertii, which La 
Harpe translates into no more than 540 millions of livres : whereas, suppos- 
ing the value of gold to have varied little between the days of Csesar and of 
Caligula, which is probable enough, it will be found to amount to very near- 
ly 3000 millions of livres. Indeed, it seems hardly possible, that a less sum 
would have sufficed for the monstrous extravagancies recorded of him. 

Horace, Epist. 2. lib. ii., speaks of an estate, that, from the context, must 
have been a considerable one, as being of the value of 300,000 sestertii, 
which, according to my view, amounted to 303,600 fr. of our present mo- 
ney. His commentator, Dacier, perverts the meaning of the passage, by 
estimating the estate in question, at 22,500 fr. only. 

t Le Blanc, Traits Monnaies, p. 3, estimates the Roman lb. of 12 oz. at 
the actual weight of only 10 2-3 oz. of our standard, taking as a guide, the 
weight of some of the coins of the emperors which are in a high state of 
preservation. The valuation, I have here given of the oz. of gold, takes it 
at the mint standard; viz. with a proportion of 1-10 alloy; for I take it for 
granted, that the gold, thus laid hands upon by Csesar, was not pure gold, 
but coin with a mixture of alloy. 



200 ON PRODUCTION. book i. 

of our money; which is greatly above Vertot's estimate of about 
3 millions only. 

From this specimen we may judge, how little reliance can be 
placed on the calculations of other historians, of less information 
and accuracy, than those I have been quoting. Rollin, in his 
Ancient, and Fleury, in his Ecclesiastical History, have reckon- 
ed the talentum, mina and sestertius, according to the scale made 
out by some learned persons, under the administration of Col- 
bert. This scale is liable to many objections: 1. it establishes 
upon very questionable data, the respective quantities of the 
precious metals contained in the coins of the ancients, which is 
a primary source of error: 2. the value of the precious metals 
have considerably varied, between the period of antiquity in ques- 
tion and the ministry of Colbert, which is another source of 
error: 3. the scale of reduction, drawn up under the direction of 
that minister, was calculated at the rate of 26 liv. 10 sous, to the 
mark of silver, being the then mint price of silver bullion; but 
this rate was altered before the days of Rollin, which is a third 
source of error. Lastly, since the date of his publication, that 
rate has been still further altered, and a livre tnrnois, conveys to 
us the idea of a smaller quantity of silver, than it did in his time; 
and this is a fourth source of error. Thus, whoever now takes 
up that work, relying on the calculations therein contained, will 
entertain a most erroneous idea of the income and expenditure 
of the states of antiquity, as well as of their commerce, their re- 
sources, and every part of their system and organization. 

Not that I would be understood to say, that a writer of history 
can ever have sufficient data, to give his readers, in all cases, a 
correct notion of values in general ; but, for the sake of a closer 
approximation to accuracy, than has hitherto been effected, in 
reducing the sums of ancient times, and even of the middle ages, 
into modern money, I would recommend, what indeed is gene- 
rally done, first, to inquire from those learned in antiquity, the 
actual weight of precious metal contained in the coin in question: 
secondly, as far back as the Emperor Charles V., that is to say, 
about the year 1520, that quantity, if gold, must be multiplied 
by 3 only, and if silver, by 4;* because the discovery of the Ame- 
rican mines has occasioned a fall in nearly that proportion : and 
lastly, to reduce that quantity of gold or silver into the current 
money of the period, at which he may happen to be writing. 

From the year 1520 downwards, the value of silver progres- 
sively declined until the latter end of the reign of Henry IV., 

* Until the period specified, the ratio of gold to silver in Europe was 1 
to 12. At present, it is in most nations of Europe 1 to 14, or 1 to 15; so 
that, taking the average ratio in ancient times at 1 to 11 1-4 and in mo- 
dern times at 1 to 15, gold will have increased in relative value to silver in 
the proportion of 4 to 3. Wherefore, if gold be multiplied by 3, and silver 
by 4, the result will be equal. 



CHAP. xxi. ON PRODUCTION. 201 

that is to say, towards the beginning of the seventeenth century. 
We may judge of the depression of its value by the increasing 
price of any given commodity, in the manner explained in the pre- 
ceding section. To acquire a correct notion of the value of the 
mark of silver during this period, it will be necessary to allow for 
a diminution in the ratio of the increased real, that is, metal, and 
not nominal or coin, price of commodities in general, or of any 
one, as wheat for instance, in particular. 

From the beginning of the seventeenth century, there will be 
no occasion for any further allowance, after having reduced the 
money of the time being into marks of silver ; for there does not 
appear to have been any further sensible decline in the value of 
silver, since most commodities have been procurable for the 
same metal-price. It will be sufficient, therefore, to reduce 
them into the money current for the time being, according to the 
then current value of the mark of fine silver.* 

By way of illustration, let us take the statement we find in the 
Memoires de Sully, viz. that this minister accumulating, in the 
vaults of the Bastile, a sum of 36 millions of livres tournois, to 
further the designs of his master against the house of Austria. If 
we wish to know the actual value of that hoard, we must, in the 
first place, examine what weight of fine silver it amounted to. 
The mark of fine silver was then represented by 22 livres tour- 
nois; consequently 36 millions of livres make 1,636,363 marks, 
5 oz. of silver. There has been no sensible variation in the va- 
lue of that metal since the period in question; for the same quan- 
tity of metal would then buy the same quantity of wheat as at 
present. Now, at the present time, 1,636,363 marks, 5 oz. or, 
in other terms, 399,588,018, 5 grammes of fine silver, coined 
into money, will make exactly 88,797,315 /r. A sum, indeed, 
that would go no great way in modern warfare; but it must be 
considered, that war is now conducted on a very different princi- 
ple, and has become infinitely more wasteful, in reality as well 
as in name. 

* I am disposed to believe, that the value of both gold and silver began 
again to decline about the commencement of the present century ; for more 
gold and silver are now given for most of the commodities least liable to 
vary in the costs of production, (a) 



(a) There is reason to believe, that the tide has now set strongly the 
other way: 1. Because the working of the mines of Spanish America, the 
great source of the production, especially of silver, has been suspended or 
abandoned in consequence of the revolutionary movements. 2. Because 
most of the European nations, and the United States also, are making a si- 
multaneous effort to restore the convertibility or par of their paper, which 
is the same thing as discovering a fresh kind of utility in the metal. 3. Be- 
cause the contraction of credit, the rival of money, consequent upon the 
general decline of prices which this simultaneous attempt has occasioned, 
must still necessarily further enlarge the utility of the raetal. T. 

34 



202 ON PRODUCTION. book i. 



SECTION VIII. 

Of the Absence of any fixed ratio of Value between one Metal and 

another. 

The same error, which led public functionaries to believe, 
that they could fix the relative value of any metal to commodi- 
ties, has also induced them to determine by act of law the rela- 
tive value of the metals employed as money, one to the other. 
Thus, it has been arbitrarily enacted, that a given quantity of sil- 
ver shall be worth 24 liv., and that a given quantity of gold shall 
likewise be worth 24 liv. In this manner, the ratio of the nomi- 
nal value of gold to that of silver came to be legally established. 

The pretension of authority was in both cases equally vain and 
impotent; and what has been the consequence? The relative 
value of the two metals to other commodities has, in fact, been 
constantly fluctuating, as well as the relative value of the metals 
themselves, when exchanged one for the other. Before the re- 
coinage of gold, in pursuance of the arret of 13th October, 1785, 
the louis d'or was commonly sold for 25 liv. and some sous of 
the silver coin. Consequently, people took good care not to pay 
in gold coin the sums bargained for in silver; otherwise they 
would really have paid 25 liv. and 8 or 10 sous for every 24 liv. 
of the sums stipulated. 

Since the recoinage in 1785, when the quantity of gold in the 
louis d'or was reduced by one-sixth, its value has nearly kept pace 
with that of 24 liv. in silver; so that gold and silver have been 
paid indifferently. However, it has still continued most custo- 
mary to pay in silver, partly from long habit, and partly because 
the gold coin, being more liable to be clipped or counterfeited, 
was received with more caution and liable to more frequent ca- 
vils about the weight and quality. 

In England a different arrangement has produced an effect di- 
rectly contrary. In the year 1728, the natural course of exchange 
fixed the relative value of gold to silver at 15 9-124 to 1; say 
16 1-14 to 1, for the sake of simplicity; 1 oz. of gold was sold 
for 15 1-14 oz. of silver, and vice versa. Accordingly, that ratio 
was established by law, 1 oz. of gold being coined into the nomi- 
nal sum of 3Z. I7s. lO^d. and 15 1-14 oz. of silver into the same 
sum. Thus, the government attempted permanently to fix a 
ratio, that is, in the nature of things, perpetually varying. The 
demand for silver gradually increased ; its use for plate and other 
domestic purposes became more general ; the India trade re- 
ceived an additional stimulus, and took off silver in preference to 
gold, for this reason, that the relative value of silver to gold is 
higher in the East than in Europe ; so that, by the end of the last 



CHAP. xxr. ON PRODUCTION. 203 

century, the ratio of these metals one to the other in England 
became about 14| to 1 only; and the same quantity of silver, 
that was coined into 3/. 17s. lO^r/., would then sell in the market 
for 41. in gold. There was thus a profit on melting down the 
silver, and a loss on payments in that metal ; for which reason, 
thenceforward, until tlie parliamentary suspension of specie pay- 
ments by the Bank of England in 1797, payments of course were 
commonly made in gold. 

Since 1797, all payments have been made in paper. But, if 
England shall return to a metallic currency, framed upon the 
former monetary principles and regulations, it is probable, that 
payments will be made in silver instead of gold, as before the 
suspensioa; for gold has risen in relative price to silver in the 
English market, probably in consequence of the large export of 
specie for commercial purposes, and greater difficulty of pre- 
vention in gold than in silver. Gold bullion in the English mar- 
ket is now to silver bullion in the ratio of about 1 to 15-|, although 
the mint ratio is still 1 to 15 1-14. A payment in gold instead 
of silver would, therefore, be a gratuitous sacrifice of the differ- 
ence between 15 1-14 and 15|. 

Hence may be drawn this conclusion; that it is impossible in 
practice to assign any fixed ratio of exchangeable value to com- 
modities, whose ratio is for ever fluctuating, and, therefore, that 
gold and silver must be left to find their own mutual level, in the 
transactions in which mankind may think proper to employ 
them.* 

The above remarks upon the relative value of gold and silver 
are equally applicable to silver and copper, as well as to all other 
metals whatever. There is no more propriety in declaring, that 
the copper contained in twenty soits shall be worth the silver 
contained in a Iwre tournois, than in enacting, that the silver 
contained in 24 liv. tournois shall be worth the gold in a louis 
d'or. However, little mischief has been occasioned by fixing 
the ratio of copper to the precious metals, because the law does 
not authorize the payment of sums stipulated in livres tournois 
andfra7ics in either copper or the precious metals indifferently; 

* The relative position of gold and silver, in respect to value, is by no 
means determined by the respective supply of each from the mines. Hum- 
boldt states, in his Essai Pol. sur la Nouvelle Espagne, torn. iv. p. 222, oct. 
that silver is produced from the mines of America and Europe jointly, in 
the ratio to gold, of 45 to 1. Now the ratio of their value, instead of being 
45 to 1, is only 

In Mexico - - 15 5-8 - - - to 1 
. — France - - 15 1-2 .... 1 

— China from 12 to 13 - . 1 

— Japan — 8 - 9 - - 1 

The difference is probably owing to the superior utility and demand of sil- 
ver for the purposes of plate, &c. as well as of money. It would seem, that 
this cause operates more forcibly in the East than in the West ; for gold 
jewellery is relatively cheaper there than in our part of the world. 



204 ON PRODUCTION. book u 

so that, in reality, the only metal money recognised by law as 
legal tender, for sums above the value of the lowest denomina- 
tion of silver coin, is silver or gold. 



SECTION IX. 

Of Money as it ought to he. 

From all that has been said in the preceding sections may be 
inferred my opinion of what money ought to be. 

The precious metals are so well adapted for the purposes of 
money, as to have gained a preference almost universal; and, as 
no other material has so many recommendations, no change in 
this particular is desirable. 

So also of their division into equal and portable particles. 
They may very properly be coined into pieces of equal weight 
and quality, as has heretofore been the practice among most 
civilized nations. 

Nor can there be any better contrivance, than the giving them 
such an impression, as shall certify the weight and quality; or 
than the exclusive reservation to government of the right of im- 
pressing such certificate, and, consequently, of coining money, 
for the certificate of a number of coiners, all working together 
and in competition one with the other, could never give an equal 
security. 

Thus far, then, and no further, should the public authority in- 
termeddle with the business of money. 

The value of a piece of silver is arbitrary, and is established 
by a kind of mutual accord on every act of dealing between one 
individual and another, or between the government and an indi- 
vidual. Why, therefore, attempt to fix its value beforehand ? 
since, after all, the fixation must be imaginary, and can never an- 
swer any practical purpose, in the money transactions of man- 
kind. Why give a denomination to this fixed, imaginary value, 
which money can never possess? For what is a dollar, a ducat, 
a florin, a pound sterling, or a franc; what, but a certain weight 
of gold or silver of a certain estabUshed standard of quality? 
And, if this be all, why give these respective portions of bullion 
any other name, than the natural one of their weight and quality? 

Five grammes of silver, says the law, shall be equivalent to a 
franc : which is just as much as to say, 5 grammes of silver is 
equivalent to 5 grammes of silver. For the only idea, presented 
to the mind by the word franc, is that of the 5 grammes of silver 
it contains. Do wheat, chocolate, or wax, change their name 
by the mere act of apportioning their weight? A pound weight 
of bread, chocolate, or of wax candles, is still called a pound 
weight of bread, chocolate or wax candles. Why, then, should 



CHAP. XXI. ON PRODUCTION. 205 

not a piece of silver, weighing 5 grammes, go by its natural ap- 
pellation? Why not call it simply 5 grammes of silver? 

This slight alteration, verbal, critical, and nugatory as it may 
seem, is of immense practical consequence. Were it once ad- 
mitted, it would be no longer possible to stipulate in nominal va- 
lue: every bargain would be a barter of one substantial commo- 
dity for another, of a given quantity of silver for a given quantity 
of grain, or butcher's meat, of cloth, &c. &c. Whenever a con- 
tract for a long prospective period was entered into, its violation 
could not escape detection: a person taking an obligation to pay 
a given quantity of fine silver, at a day certain, would know pre- 
cisely how much silver he would have to receive at the period 
assigned, provided his debtor continued solvent. 

The whole monetary system would thenceforth fall to the 
ground; a system replete with fraud, injustice, and robbery, 
and moreover so complicated, as rarely to be thoroughly under- 
stood, even by those who make it their profession. It would ever 
after be impossible to effect an adulteration of the coin, except 
by issuing counterfeit money; or to compound with creditors, 
without an open, avowed bankruptcy. The coinage of money 
would become a matter of perfect simplicity, a mere branch of 
metallurgy. 

The denominations of weight, in common use before the intro- 
duction into France of the metrical system, that is to say, the 
once, gros, grain, had the advantage of conveying the notion of 
portions of weight, that had remained stationary for many ages, 
and were applicable to all commodities whatever, without distinc- 
tion : so that the once could not be altered for the precious 
metals, without altering it at the same time for sugar, honey, and 
all commodities sold by the weight : but, in this particular, the 
new metrical system is infinitely preferable. It is founded upon 
a basis provided by nature, which must remain invariable as long 
as our world shall last. The gramme is the weight of a cubic 
centimetre of water: the centimetre is the hundredth part of a me- 
tre, and the metre is yo'o^o'o oo P*^""*- ^^ *^he arc formed by the cir- 
cumference of the earth, from the pole to the equator. The terra 
gramme may be changed, but no human power can change that 
portion of weight actually designated by the term gramme ; and 
whoever shall contract to pay at a future date a quantity of silver, 
equal to 100 grammes weight, can never pay a less quantity of 
silver, without a manifest breach of faith, whatever arbitrary mea- 
sures of power may intervene. 

The power of a government to facilitate the transactions of 
exchange and contract, wherein the commodity, money, is em- 
ployed, consists in dividing the metal into different pieces of one 
or more grammes or centigrammes, in such manner, as to admit 
of instant calculation of the number of grammes a given payment 
will require. 



206 ON PRODUCTION. book u 

It has been ascertained by the experiments of the Academy of 
Sciences, that gold and silver resist friction better with a slight 
mixture of alloy, than in a pure state. People versed in these 
matters say, besides, that this complete purity can not be obtain- 
ed, without a very expensive chemical process : that would add 
greatly to the expense of coinage. 7'here is no sort of objection 
to mixing alloy, provided the proportion be signified by the im- 
pression, which should be nothing more than a mere certificate of 
the weight and quality of the metal. 

I make no mention of the terms franc, decime, centime, be- 
cause those names should never have been given to the coin, 
being, in fact, names indicative of nothing whatever. The laws 
of France, instead of enacting that pieces, called /j-ajics, shall be 
coined, having the weight of 5 grammes of silver, should have 
simply ordered a coinage of pieces of 5 grammes. In which case, 
a letter of credit or bill of exchange, instead of being drawn for, 
say 400/r., would be for 2000 gramntes of silver of the standard 
of 9-10 silver to 1-10 alloy; or if preferred, for 130 grammes of 
gold of the same degree of purity; and the payment would be the 
most simple imaginable ; for the pieces of coin, gold and silver, 
would be all fractions or multiples of the grammx. of metal of that 
standard. 

• However, it would still be necessary to enact, that no sura 
stipulated in grammes of silver or gold should be payable other- 
wise than in coin, unless under a special proviso; else, the debt- 
or might discharge all claims in bullion of somewhat less value 
than coin. This is obviously matter of practical arrangement ; 
the principle requiring nothing, but that the obligation, after men- 
tioning the metal and standard, should specify on the face of it, 
whether payable in national coin or bullion. The only object of 
such a law would be, to save the continual necessity of enume- 
rating many particulars, that would thenceforward be implied. 

A government should never coin the bullion of private persons, 
without charging the profit, as well as the cost, of the operation. 
The monopoly of coinage will enable it to make this profit some- 
what high : but it should be varied according to the state of me- 
tallurgic science, and the demand for circulation. Whenever 
the state has little to coin on its own account, it had better lower 
its charges, than let its machinery and workmen remain idle ; 
and, on the other hand, raise its charges, when the influx of bul- 
lion is rapid and superabundant. And in this, it would but imi- 
tate other manufacturers. As to the bullion bought and coined 
by government on its own account, the coin issued would reim- 
burse the charges; and yield a profit by its superior value in ex- 
change ; as I have endeavoured to prove above in Section 4. 

To the marks indicative of weight and quality, should of 
course be super^idded every device to prevent counterfeits. 
I have not occupied my reader's time with any observations 



CHAP. XXI. ON PRODUCTION. 207 

on the relative proportion of gold to silver ; nor was there any 
occasion to do so. Having avoided any specification of their 
value under any particular denomination, I shall pay no more at- 
tention to the alternating variations of that value, than to the 
fluctuations of the relative value of both to all other commodities. 
This must be left to regulate itself; for any attempt to fix it 
would be vain. With regard to obligations, they would be dis- 
chargeable in the terms of contract: an undertaking to pay 100 
grammes of silver would be discharged by the transfer of 100 
grammes of silver ; unless, at the time of payment, by mutual 
consent of the contracting parties, any other metal, or goods at a 
rate agreed on, should be substituted in preference. 

It would be difficult to calculate the advantage, that would ac- 
crue to industry in all its branches, from so simple an arrange- 
ment; but some notion of it may be obtained, by considering the 
mischiefs that have resulted from a contrary system. Not only 
has the relatiye pecuniary position of individuals been repeatedly 
overset, and the best planned and most beneficial productive en- 
terprises altogether thwarted and rendered abortive; but the inte- 
rests of the public, as well as of private persons, are, almost 
every where, subject to daily and hourly aggression. 

A medium, composed entirely of either silver or gold, bearing 
a certificate, pretending to none but its real intrinsic value, and, 
consequently, exempt from the caprice of legislation, would hold 
out such advantages to every department of commerce, and to 
every class of society, that it could not fail to obtain currency 
even in foreign countries. Thus, the nation, that should issue 
it, would become a general manufacturer of money for foreign 
consumption, and might derive from that branch of manufacture 
no inconsiderable revenue. We read in Le Blanc,* that a par- 
ticular coin issued by St. Louis, and called agnels cfor, from the 
figure of a lamb impressed upon them, was in great request even 
among foreigners, and a favourite money in commercial dealings, 
for the sole reason that it invariably contained the same quantity 
of gold, from tbe reign of St. Louis to that of Charles VI. 

Should France be so fortunate as to make this experiment, 
I hope none of those who do me the honour to read this work, 
will feel any regret at the drain of its money, to use the expres- 
sion of certain persons, who neither know nor choose to learn 
any thing of the matter. It is quite clear, that neither silver nor 
gold coin will go out of the kingdom, without leaving behind a 
value fully equivalent to the metal and the fashion it bears. The 
trade and manufacture of jewellery for export are considered lu- 
crative to the nation ; yet, they occasion an outgoing of the pre- 
cious metals. The beauty of the form and pattern adds, to be 
sure, greatly to the price of the metal thus exported ; but the ac- 
curacy of assay and weight, and, above all things, the mainte- 

* Traits Hist, des Monnaies de la France, Prolegom. p. 4. 



208 ON PRODUCTION. book i. 

nance of the coin at an invariable standard of weight and quality, 
would be an equal recommendation, and would undoubtedly be 
just as well paid for. 

Should it be objected, that the same system was adopted by 
Charlemagne, when he called a pound of silver a livre, and that 
notwithstanding the coin has been since repeatedly deteriorated, 
until, at last, what was called a livre, contained, in fact, but, 96 
gr., I answer : — 

1. That, neither in the time of Charlemagne, nor at any sub- 
sequent period, has there ever been a coin containing a pound 
of silver ; that the livi^e has always been a money of account, an 
ideal measure. The silver coin of Charlemagne and his success- 
ors, consisted of sols of silver, the sol being a fractional part of 
the pound weight. 

2. None of the coin has ever borne on the face of it the indi- 
cation of the weight of metal it contained. There are extant in 
the collections of medals many pieces coined in the reign of 
Charlemagne. The impression was nothing more than the name 
of the monarch, with the occasional addition of the name of the 
town where the coin was struck, executed in very rude charac- 
ters; which, indeed, is not to be wondered at, considering that the 
monarch, though an avowed patron of literature, was himself un- 
able to write. 

3. The coin was yet further from bearing any thing indicative 
of the standard quality of the metal, and this was the thing first 
encroached upon ; for the sol in the reign of Philip I. still con- 
tained the same fractional weight of the livre as originally ; but 
it was made up of S parts of silver to 4 copper, instead of contain- 
ing, as under the second race of monarchs, 12 oz. of fine silver, 
which was the then weight of the livre. 

The very singular state of the actual money of England, and 
the extraordinary circumstances, that have occurred in respect 
to it since the first editions of this work appeared, have given a 
decisive proof, that the mere want of an agent of circulation, or, 
of the commodity, money, is sufficient to support a paper-money 
absolutely destitute of security for its convertibility at a high rate 
of value, or even at a par with metal, provided it be limited in 
amount to the actual demand of circulation.* — Whence some 
English writers of great intelligence in this branch of science 
have been led to conclude, that, since the purposes of money call 
into action none of the physical and metallic properties of its ma- 
terial, some substance less costly than the precious metals ; pa- 
per, for instance, may be employed in them with good effect, if 
due attention be paid to keep the amount of the paper within the 
demands of circulation. The celebrated Ricardo, has, with this 
object, proposed an ingenious plan, making the Bank or corporate 

* Vide our author's pamphlet, entitled, de VAngletene, et des Anglais, 
1815, 3d edition, p. 50. et seq. 



CHAP. xxr. ON PRODUCTION. 209 

body, invested with the privilege of issuing the paper-money, liable 
to pay in bullion for its notes on demand. A note, actually con- 
vertible on demand into so much gold or silver bullion, can not fall 
in value below the value of the bullion it purports to represent; and, 
on the other hand, so long as the issues of the paper do not exceed 
the wants of circulation, the holder will have no inducement to 
present it for conversion, because the buHion, when obtained, 
would not answer the purposes of circulation. If a casual in- 
terruption of confidence in the paper should bring it for conversion 
in too large quantity, the paper remaining in circulation must rise 
in value, in the absence of any other circulating medium, and there 
would be an inducement to bring bullion to the bank to be convert- 
ed into paper.* 



SECTION X. 

Of a Copper and base JVfeia/f Coinage. 

The copper coin and that of base metal, are not, strictly 
speaking, money ; for debts can not be legally tendered in this 
coin, except such fractional sums, as are too minute to be paid 
in gold or silver. Gold and silver are the only metal-money 
of almost all commercial nations. Copper coin is a kind of 
transferable security, a sign or representative of a quantity of 
silver too diminutive to be worth the coining ; and, as such, 
the government, that issues it, should always exchange it on 
demand for silver, when tendered to an amount equal to the 
smallest piece of silver coin. Otherwise, there is no security 
against the issue of an excess beyond the demand of circulation. 

Whenever there is such an excess, the holders, finding the 
base metal less advantageous than the gold and silver it repre- 
sents but does not equal in valife, would strive to get rid of it in 
every way ; whether by selling to a loss, or by employing it in 
preference to pay for low-priced articles, which would conse- 
quently rise in nominal price ; or by proffering it to their credit- 
ors in larger quantity, than enough to make up the fractional 
parts of sums in account. The government, having an interest 
in preventing its being at a discount, because that would reduce 
the profit upon all future issues, generally authorizes the latter 
expedient. 

* Proposals for an economical and secure Currency, by D. Ricardo, 1816. 
It seems, the British legislature has since adopted the expedient of that 
"writer, in 1819. The experiment is yet in progress ; and whatever be its 
ultimate result, it must needs advance the interests of the science. 

t Billon, a compound of copper and silver, containing 1-4 or 1-2 only of 
the latter, and the residue of the former. It is used in the fractional coin- 
age of France, to supersede the employment of copper in large quantities. 

35 



210 ON PRODUCTION. book i. 

Before 1808, for instance, it was a legal tender at Paris to 
the extent of 1-40 of every sum due; which had exactly the same 
effect, as a partial debasement of the national currency. Every 
body knew, when a bargain was concluded, that he was liable to 
be paid in proportion of 1-40 copper or brass metal, to 39-40 
silver, and made his calculation ac( cordingly, on terms propor- 
tionably Higher, than if no such regulation had existed. It is 
with this particular, precisely as with the weight and standard of 
the silver coin; sellers do not stop to weigh and assay every piece 
they receive ; but the dealers in gold and silver, and those con- 
nected with the trade, are perpetually on the watch to compare 
the intrinsic, with the current, value of the coin ; and, whenever 
their values differ, they have an opportunity of gain; their opera- 
tions to obtain which, have a constant tendency to put the cur- 
rent value of the coin on a level with its real value. 

The obligation to receive copper in any considerable propor- 
tion, has, in like manner, an influence upon the exchange with 
foreigners. There is no question, that a letter of exchange on 
Paris payable in francs is sold cheaper at Amsterdam, in conse- 
quence of the liability to receive part payment in copper or base 
metal; just as it would be, if the /ranc were made to contain less 
of silver and more of alloy. 

Yet, it is to be observed, that, on the whole, the value of money 
is not so much affected by this circumstance, as by the mixture 
of alloy ; for the alloy has positively no value whatever, for the 
reasons above stated ;* whereas, the copper money, payable in 
the ratio of 1-40, had a small intrinsic value, though inferior to 
the sum in silver, it was made to pass for : had it been of equal 
value, there would have been no occasion for an express law to 
give it currency. 

As long as a government gives silver on demand for the cop- 
per and base metal regularly presented, it can with little inconve- 
nience give them very trifling intrinsic value ; the demand for 
circulation will always absorb a very large quantity, and they will 
maintain their value as fully, as if really worth the fractional 
silver represented ; on exactly the same principle, as a bank-note 
passes current, and that too for years together, without any in- 
trinsic value, just as well as if really worth the sum it purports on 
the face of it to contain. In this manner, such a coinage can be 
made more profitable to the government than by any compulsion 
to receive it in part payment ; and the value of the legal coin 
will suffer no depreciation. The only danger is that of counter- 
feits, which there is the stronger stimulus for avarice to fabricate, 
in proportion as the difference between the intrinsic, and the cur- 
rent, value grows wider. 

The last king of Sardinia's predecessor, in attempting to with- 

* Sujprd, p. 170. 



CHAP. XXI. ON PRODUCTION. 211 

draw from circulation a base currency, issued by his father in a 
period of calamity, had more than thrice the quantity originally 
issued by the government thrown upon his hands. The same 
thing happened to the king of Prussia, when, under the assumed 
name of the Jew Ephraim, he withdrew the base coin he had 
compelled the Saxons to receive, during his distresses in the 
seven years' war ;* and for exactly the same reason. Counterfeits 
of the coin are usually executed beyond the national frontier. In 
England, it was attempted to remedy this evil in the year 1799, 
by a coinage of half-pence with a very fine impression, and exe- 
cuted with an attention and perfection, that counterfeiters can 
rarely bestow. 



SECTION XL 

Of the •preferable Form of Coined JVloney. 

The wear of the coin by friction is proportionate to the extent 
of its surface. Of two pieces of coin of equal weight and qua- 
lity, that will suffer least from continual use, which ofTers the 
least surface to the friction. 

The spherical or globular form is, consequently, preferable in 
this respect, as least liable to wear ; but it has been rejected on 
account of its inconvenience. 

Next to this form, the cylinder, of equal depth and breadth is 
that, which exposes the smallest surface ; but this is fully as in- 
convenient as the other ; the form of a very flat cylinder has, 
consequently, been very generally adopted. However, from 
what has been already said, it will appear, that the less it is flat- 
tened the better ; and that the coin should rather be made thick 
than broad. 

With regard to the impression, the chief requisites are, 1. 
that it specify the weight and quahty of the piece ; 2. that it be 
very distinct, and intelligible to the meanest capacity ; 3. that 
the die oppose all possible difficulties to the defacing or reducing 
of the coin; that is to say, that it be so contrived, that neither the 
ordinary wear nor fraudulent practices should be able to reduce 
the weight without destroying the impression. The last coined 
English half-pence have a cord, not projecting, but indented iri 
the thickness of the circumference, and occupying the central 
part of the circumference only, so as to make it liable neither to 
chpping nor wear. This mode might be adopted in the silver and 
gold coinage with certainty of success ; and it is of much more 
consequence to prevent their deterioration. 

When the impression is in basso relievo, it should project but 

* Mongez, Consider, sur les Monnaies, p. 31. 



212 ON PRODUCTION, book u 

little, for the convenience of piling the pieces one upon another, 
as well as to reduce the friction. On the same account, a pro- 
jecting impression should not be too sharp on the surface, or it 
would wear away too rapidly. With a view 'to prevent this, ex- 
periments have been made of dies executed in alto rehevo ; but 
it was found, that the coin was thereby too much weakened, and 
liable to be bent or broken. This plan, however, might possibly 
be practised with advantage, if the pieces were secured by great- 
er thickness. 

The same motive of giving to the coin the least possible sur- 
face, should induce the government to issue as large pieces as 
convenience will admit; for the more pieces there are, the great- 
er is the surface exposed to friction. No more small pieces of 
coin should be issued, than just enough to transact exchanges of 
small amount, and to pay fractional sums. All large sums should 
be paid in large piec^ of coin. 



SECTION XII. 

Of the Party, on tvhoni the Loss of the Coin by Wear should 
properly fall. 

It has been a question, who ought to defray the loss, conse- 
quent upon the friction or wear of the coin ? In strict justice, 
the person who had made use of it, in like manner as the wearer of 
any other commodity. A man, that re-sells a coat after having 
worn it, sells it for less than he gave for it when new. So a man, 
that sells a crown piece for some other commodity, should sell 
it for less than he gave ; that is to say, should receive a smaller 
quantity of goods than he obtained it with. 

But the portion of a specific coin, consumed in its passage 
through the hands of any one honest person, is less than almost 
any assignable value. It may circulate for many years together, 
without any sensible diminution of its weight; and, when the di- 
minution is discovered, it may be impossible to tell, by which of 
the innumerable holders it was effected. I am aware, that each 
of them has imperceptibly shared the depreciation of its exchange- 
able value, occasioned by the wear ; that the quantity of goods 
it would purchase has declined by an insensible gradation ; that, 
although the depreciation has been imperceptibly progressive, it 
becomes at last very manifest; and, that worn money will not be 
taken at par with new coin. Consequently, I think, that, if an 
entire class of coin were gradually so reduced, as to make a re- 
coinage necessary, its holders could not in reason expect that 
their reduced coin should be exchanged for new at par, piece 
for piece. Their money should be received, even by the govern- 
ment, at no more, than its real value; the silver it contains is less 



CHAP. XXI. ON PRODUCTION. 213 

in quantity than at the first issue ; and it has been received by 
the holders at a lower rate of value ; they have given for it less 
goods, than they would have done in the outset. 

In fact, this is the course that rigid justice would prescribe ; 
but there are two reasons, why it should not be strictly enforced. 

1. Each individual piece of coin is not, if I may be allowed 
the expression, a substantive article of commerce. Its exchange- 
able value is calculated, not according to the weight and qua- 
lity of the identical piece in question, but according to the 
average weight and quality of the coin in large quantities, as as- 
certained by common experience. A crown piece of an earlier 
date, and more worn, is yet freely received in exchange for one 
more new and perfect; the difference is sunk in the average. The 
mint issues new pieces every year of the full weight and standard, 
which prevents the coin from declining sensibly in value, in con- 
sequence of the friction, even for many years after its issue. 

This circumstance is illustrated by the fact, of the French 
pieces of 12 and 24 sous passing current at par with the crown- 
piece of 6 livres without any difficulty ; although the same nomi- 
nal sum, in the shape of the worn pieces of 12 and 24s., con- 
tained in reality about ^ less silver than the crown-piece. 

The subsequent law, which prohibited their being taken by 
the public receivers or private persons at more than 10 and 20 
sous, rated them at their full intrinsic value, but below the rate, 
at which the then holders had taken them. For their value had 
been previously kept up to 12 and 24 sous in spite of the wear, 
.by reason of their passing current at par with the crown-piece. 
Thus, the last holder was saddled with the entire loss of a fric- 
tion, to which the innumerable hands they had passed through 
had all contributed. 

2. The impression is equally effectual in giving currency at 
the last as at the first, although it becomes in course of time 
scarcely, if at all visible ; witness the shillings of England. The 
coin derives, as above explained, a certain degree of value from 
the mere impression, which value has been admitted and recog- 
nised throughout, until it reaches the ultimate holder, who has in 
consequence received it at a higher rate, than he would a piece 
of blank bullion of equal weight. To saddle him with the differ- 
ence, would be to make him lose the whole value of the impres- 
sion, although it has been equally serviceable to perhaps a mil- 
lion of others. 

On these grounds, I am inclined to think, the loss by wear, 
and that of the impression, should be borne by the community at 
large ; that is to say, by the public purse : for the whole so- 
ciety derives the benefit of the money ; and it is impossible to 
tax each individual, in the precise proportion of the use he has 
made of it. 

To conclude; every individual, that carries bullion to the 



214 ON PRODUCTION. book i, 

mint to be coined may be fairly charged the expenses of the 
process, and, if thought advisable, the full monopoly-profit. Thus 
far there is no harm done : his bullion is increased in value to 
the full amount of what he has been charged by the mint ; other- 
Vi^ise, he would never have carried it thither. At the same time, 
I am of opinion, that the mint should always give a new piece in 
exchange for an old one on demand : which need nowise inter- 
fere with the utmost possible precautions against the clipping 
aqd debasing of the coin. The mint should refuse such pieces, 
as have lost certain parts of the impression, which are not liable 
to fair and unavoidable wear ; and the loss in that case should 
fall on the individual, careless enough to take a piece thus pal- 
pably deficient. The promptitude, with which the public would 
take care to carry injured or suspicious pieces to the mint, would 
greatly facilitate the detection of fraudulent practices. 

With diligence on the part of the executive, the loss arising 
from this source might be reduced to a mere trifle, and the sys- 
tem of national money would be materially improved, as well as 
the foreign exchange. 



CHAPTER XXII. 

OF SIGNS OR REPRESENTATIVES OF MONEY. 

SECTION I. 

Of Bills of Exchange and Letters of Credit. 

A BILL of exchange, a promissory note or check, and a letter 
of credit, are written obligations to pay, or cause to be paid, a 
sum of money, either at a future time, or at a different place. 

The right conveyed by the assignment of these engagements, 
though not capable of being enforced immediately, or elsewhere 
than at the stipulated place, get gives them an actual value, 
greater or less, according to circumstances. — Thus, a bill of ex- 
change for 100 /r., payable at Paris at two months' date, may 
be negotiated or sold, at pleasure, at the rate of, say 99 fr. ; 
while a letter of credit of like amount, payable at Marseilles in 
the same space of time, will, perhaps, be worth at Paris but 
98 fr. 

These engagements may be used as money in all transactions 
of purchase, as soon as they are invested with actual present 
value, by the prospect of their future value ; indeed, most of the 



CHAP. xxn. ON PRODUCTION. 215 

greater operations of commerce are effected through the medium 
of these securities. 

Sometimes, the circumstance of a bill of exchange being pay- 
able at another place will increase, instead of diminishing its va- 
lue ; but this depends upon the state of commerce for the time 
being. If the merchants of Paris have large payments to make 
to those of London, they will readily give more money at Paris 
for a bill upon London, than it will produce to the holder at the 
latter place. Thus, although the pound sterhng contain precisely 
as much silver as 24 fr. 74 cents^ they will, perhaps, give at 
Paris 2b fr., more or less, for every pound sterling payable in 
London.* 

This is what is called the course of exchange, being, in fact, 
a mere specification of the quantity of precious metal people will 
consent to give, for the transfer of a right to receive a given 
quantity of the same metal at any other specified place. The 
particular locality of the metal reduces or increases its value, in 
relation to the same metal situated elsewhere. 

The exchange is said to be in favour of any country, France 
for example, whenever less of the precious metal is there given 
for, than will be produced by, a bill of exchange upon another 
country ; or whenever in the foreign country more of the pre- 
cious metal is given for a bill of exchange on France, than it will 
there produce to the holder. The difference is never very con- 
siderable, and can not exceed the charge of transporting the 
precious metal itself; for, if a foreigner, who wants to make a 
payment at Paris, can remit the sum in specie at less expense 
than he could be put to by the existing course of exchange, he 
would undoubtedly remit in specie.| 

It has been imagined by some people, that all debts to fo- 
reigners can be paid by bills of exchange ; and measures have 
been frequently suggested, and sometimes adopted, for the en- 
couragement of this fictitious mode of payment. But this is a 
mere delusion. A bill of exchange has no intrinsic value ; it 
can only be drawn upon any place for a sum actually due at that 
place ; and no sum can be there actually due, unless an equal 
value, in some shape or other, has been remitted thither : the 
imports of a nation can only be paid by the national export ; and 
vice versa. Bills of exchange are a mere representative of sums 
due ; in other words, the merchants of one country can draw 
bills on those of another for no more, than the full amount of the 

* If the credit on London be payable in paper-money instead of specie, 
the course of exchange with Paris of the pound sterling, may, perhaps, fall 
to 21 /r. 18 /r. or even less, in proportion to the discredit of the paper of 
England. 

t In that expense I include the charge and risk of transport and of smug- 
gling also, if the export of specie be prohibited ; which latter is propor- 
tionate to the difficulty of the operation. The risks are estimated in the 
rate of insurance. 



216 ON PRODUCTION. booki. 

goods of every description, silver and gold included, which they 
may have sent thither directly or indirectly. If one country, say 
France, have remitted to another country, Germany perhaps, 
merchandise to the value of 10,000,000 /r., and the latter have 
remitted to the former to the amount of 1 2,000,000 /r., France 
can pay as much as ten millions by the means of bills of ex- 
change, representing the value of her export ; but the remaining 
two millions can not be so discharged directly, although possibly 
they may by bills of exchange upon a third country, Italy for in- 
stance, whither she may have exported goods to that extent. 

There is, indeed, a species of bills, called by commercial men, 
accommodation-paper, which actually represents no value what- 
ever. A. merchant at Paris, in league with another of Hamburgh, 
draws bills upon his correspondent, which the latter pays or pro- 
vides for, by re-drawing and negotiating or selling bills at Ham- 
burgh upon his correspondent at Paris. — So long as these bills 
are in possession of any third person, that third person has ad- 
vanced their value. The negotiation of such accommodation- 
paper is an expedient for borrowing, and a very expensive one ; 
for it entails the loss of the banker's commission, brokerage and 
other incidental charges, over and above the discount for the 
time the bills have to run. Paper of this description can never 
wipe out the debt, that one nation owes another ; for the bills 
drawn on one side balance and extinguish those on the other. 
The Hamburgh bills will naturally counterpoise those of Paris, 
being in fact drawn to meet them ; the second set destroys the 
first, and the result is absolute nulhty. 

Thus, it is evident, that one nation can not otherwise discharge 
its debts to another, than by remittance of actual value in goods 
or commodities, in which term I comprise the precious metals, 
amongst others, to the full amount of what it has received or 
owes. If the actual values directly remitted thither are insuffi- 
cient to balance the receipts or imports thence, it may remit to a 
third nation, and thence transport produce enough to make up 
the deficit. How does France pay Russia for the hemp and tim- 
ber for ship-building imported thence 1 — By remittance of wines, 
brandies, silks, not merely to Russia, but, likewise, to Hamburgh 
and Amsterdam, whence again a remittance of colonial and other 
commercial produce is forwarded to Russia. 

Governments have commonly made it their object to contrive 
that the precious metals shall form the largest possible portion of 
the national import from, and the least possible portion of the 
national export to, foreign countries. I have already taken oc- 
casion to remark, with regard to what is improperly called the 
balance of trade, that, if the national merchant finds the precious 
metals a more profitable foreign remittance than another com- 
modity, it is, likewise, the interest of the state to remit in that 
form ; for the state can only gain and lose in the persons of its 



CHAP. XXII. ON PRODUCTION. 217 

individual subjects ; and, in the matter of foreign commerce, 
whatever is best for the individuals in the aggregate, is best for 
the state also.* Thus, when impediments are thrown in the way 
of the export of the precious metals by individuals, the effect is 
to compel an export in some other shape, less advantageous to 
the individual and the public too. 



SECTION 11. 

Of Banks of Deposit. 

The constant intercourse betv.'een a small state and its neigh- 
bours occasions a perpetual influx of foreign coin. For, although 
the small state may have a national coinage of its own, yet, the 
frequent necessity of taking the foreign instead of the national 
coin in payment, requires the fixation of the ratio of their relative 
value, in the current transactions of business. 

There are many mischiefs attending the use of foreign coin, 
arising chiefly from the great variation of weight and quality. It 
is often extremely old, worn, and defaced; not having participat- 
ed in the general re-coinage of the nation that issued it, where, 
perhaps, it is no longer current; all which circumstances, though 
considered in settling its current relative value to the local coin, 
yet, do not quite reduce it to the natural level of depreciation. 

Bills drawn from abroad upon such a state, being payable in 
the coin thus rendered current, are, in consequence, negotiated 
abroad at some loss ; and those drawn upon foreign countries, 
and, consequently, payable in coin of a more steady and intelli- 
gible value, are negotiated in the smaller state at a premium, 
because the holder of them must have purchased them in a de- 
preciated currency. In short, the foreign coin is always ex- 
changed for the local currency to a loss, {a) 

The remedy devised by states of this inferior class is the sub- 
ject of the present section. They established banks, | where 

* This position applies to foreign commerce only ; the monopoly-profits 
of individuals in the home-mai-ket are not entirely national gains. In in- 
ternal dealings, the sura of the utility obtained is all that is acquired by the 
community. 

t Venice, Genoa, Amsterdam, and Hamburgh had each an establishment 
of this nature. All have been swept away by the torrent of the revolu- 
tionary war; but there may be some use in examining the nature of insti- 



(a) Why, our author has not told us ; but it may be inferred, because the 
local currency is made up of foreign and domestic coin. This is by no 
means a necessary consequence ; for the local authority may have left the 
contracts of individuals quite free ; and their paper-dealings may be express- 
ed in any coin that may be preferred. T. 

36 



218 ON PRODUCTION. book i. 

private merchants could lodge any amount of local national 
coin, of bullion, or of foreign coin, reckoned by the bank as 
bullion ; and the amount, so lodged, was entered as so much mo- 
ney of the legal national standard of weight and quality. At the 
same time the bank opened an account with each merchant mak- 
ing such deposit, giving him credit for the amount of the deposit. 
Whenever a merchant wanted to make a payment, there was no 
occasion to touch the deposit at all ; it was sufficient to transfer 
the sum required, from the credit of the party paying, to that of 
the party receiving. Thus values could be transferred continu- 
ally by a mere transfer in the books of the bank. The whole 
operation was conducted without any actual transfer of specie; 
the original deposit, which was entered at the real intrinsic value 
at the time of making it, remained as security for the credit trans- 
ferred from one person to another; and the specie, so lodged 
with the bank, was exempt from any reduction of value by wear, 
fraud, or even legislative enactment- 

The money still remaining in circulation, wherever it was ex- 
changed for the bank deposits, that is to say, for entries in the 
bank books, necessarily lost in proportion to the reduction of its 
intrinsic value. And this loss occasioned the difference of va- 
lue, or agio at Amsterdam, between bank money and circulating 
money, which was on the average from 3 to 4 per cent, in favour 
of the former. 

It will easily be imagined, that bills of exchange, payable in a 
currency so little liable to injury or fluctuation, must be negotia- 
ble on better than ordinary terms. In fact, it was observable, 
that on the whole, the course of exchange was rather in favour 
of the countries, that paid in bank, and unfavourable to those that 
paid in circulating money only. 

The bank retained these deposits in perpetuity; for the re- 
issue would have been attended with serious loss; inasmuch as 
it would have been the same thing, as producing good money of 
the full original value, to be taken at par with the deteriorated 
circulating coin, which passes current for — not its intrinsic, but 
its average weight. The coin withdrawn from the bank would 
have been mixed up with the mass of circulation, and passed 
current at par with the rest. So that the withdrawing such de- 
posits would have been a gratuitous sacrifice of the excess of va- 
lue of bank above circulating money. 

This is the nature of banks of deposit; most of which com- 
bined other operations with the primary object of their institu- 
tion, but of them I shall speak elsewhere. They derived their 

tutions, that may some day or otlier be re-established. Besides, the inves- 
tigation will throw light upon the history of the communities that estab- 
lished them, and of commerce in general. At any rate, it was necessary 
to enumerate all the various expedients that have been resorted to as sub- 
stitutes for money. 



CHAP. xxii. ON PRODUCTION. 219 

profits, partly from a duty levied upon every transfer, and partly 
from operations incident to, and compatible with their institution; 
as, for example, advances made upon a deposit of bullion. 

It is evident, that the inviolability of the deposit, confided to 
them, is essential to the success of such establishments. At 
Amsterdam, the four burgomasters, or municipal magistrates, 
were trustees for the creditors. Annually, on leaving office, they 
handed over the trust to their successors, who, after inspecting 
the account and verifying it by the registers of the bank, bound 
themselves by oath, to surrender their charge inviolate to their 
successors in office. This trust was scrupulously executed from 
the first establishment of the bank in 1609 until 1672, when the 
forces of Louis XIV. penetrated as far as Utrecht. The depo- 
sits were then faithfully restored to the individuals. It would 
seem to have been afterwards less scrupulously managed ; for, 
when the French took possession of that capital in 1794, and 
called for a statement of the concern, it was found to be in ad- 
vance of no less a sum than 1 0,624,793 ^onns to the India com- 
pany, and to the provinces of Holland and West-Friezeland, 
which were wholly unable to re-pay it, In a country governed 
by a power without control or responsibility, it may be expect- 
ed, that such a deposit would have been still more exposed to 
violation. («) 



SECTION III. 

Of Banks of Circulation or Discount, and of Bank-notes, or Con- 
vertible Paper. 

There is another kind of bank, founded on totally different 
principles; consisting of associated capitalists, subscribing a ca- 
pital in transferable shares, to be employed in various profitable 
ways, but chiefly in the discount of bills of exchange, that is to 
say, the advance of the value of commercial paper not yet due, 
with the deduction of interest for the time it has to run, which is 
called, the discount. 



(a) Public banks of deposit are now quite obsolete, and will probably ne- 
ver be revived. In fact they are clumsy expedients suited only to the early 
stages of commercial prosperity, and are liable to many inconveniences. 
They hold out a strong temptation to internal fraud and violence, as well 
as to external rapacity ; they withdraw from active utility a large portion 
of the precious metals, which might perhaps be turned to better account 
elsewhere ; and they yield a degree of facility of circulation nowise supe- 
rior to what may be afforded by the common proceiss of banking, except 
perhaps in secmity, and infinitely more expensive to the public and to indi- 
viduals. They have accordingly been every where supplanted by banks of 
circulation, or by the expedient of an inconvertible paper-money. T. 



220 ON PRODUCTION. book i. 

These companies, with a view to enlarge their capital and ex- 
tend their business, commonly issue notes, purporting to bear a 
promise to pay to bearer at sight, the gold or silver specified on 
the face of them. Their security for the due discharge of these 
engagements is, the commercial paper held by the bank, and 
subscribed by individuals in solvent circumstances ; for the com- 
pany gives its notes in discount, or, what is the same thing, in 
purchase of this paper. 

The private commercial paper, indeed, having a term to run 
before it falls due, can not be available in discharge of notes 
payable at sight; for which reason, every well-conducted bank 
of circulation confines its advances of cash, or notes payable in 
cash at sight, to the discount of bills at very sliort dates, and is 
careful to have always, in hand a considerable amount of specie, 
probably a third, or as much as the half of the total amount of 
their circulating notes; and, even, with all possible caution, it is 
at times greatly embarrassed, whenever a want of confidence in 
its solvency, or any untoward event, causes a sudden run upon 
the bank for cash. The bank of England has been obUged, on 
an occasion of this kind, to scrape together as many sixpences as 
it possibly could find, to gain time by the delay inseparable from 
payments in such a diminutive coin, until a part of the paper in 
its possession had fallen due. The discount bank of Paris, in 
the year 178S, being then under control of government, had re- 
course to similar paltry expedients. 

The profits of banks of circulation are very considerable ; that 
portion of the notes, which is issued on the credit of private com- 
mercial paper, continues running at interest; for the advances 
have been made with the deduction of the discount. But the 
portion of the paper, issued on the credit of the specie in reserve, 
brings no profit ; the interest lying dormant in the specie thus 
withdrawn from circulation. 

The banks of England and France make no advances to pri- 
vate persons, except on bills of exchange, and give no credit be- 
yond the funds in hand. They indemnify themselves for the 
trouble of receiving and paying on account of individuals, by 
turning to account the floating balance left in their hands. These 
two establishments have, besides, undertaken the business of 
paying the interest upon the respective national debts, receiv- 
ing an allowance for their trouble: furthermore, they occasion- 
ally make advances to the governments. 

From these various operations, they derive a great increase 
of their profits. The one last mentioned, however, is complete- 
ly at variance with the purposes of their estabhshraent, as we 
shall presently find. The advances made to the old government 
of France by the then bank of discount, and those of the bank of 
England to the English government, compelled those bodies to 
apply to the respective legislatures to give their notes a compul- 



CHAP. xxii. ON PRODUCTION. . 221 

sory circulation ; thus destroying their fundamental requisite of 
convertibility. The consequence has been, that the former of 
these banks went all to pieces, and the latter .... 

The estabhshment of several banks, for the issue of converti- 
ble notes, is more beneficial than the investment of any single 
body with the exclusive privilege; for the competition obliges 
each of them (o court the pubhc favour, by a rivalship of accom- 
modation and solidity. 

Banks of circulation issue their notes either in the discount of 
bills of exchange, that is to say, in giving their notes payable at 
sight, and circulating like cash, in exchange for private paper, 
payable at a future date upon which interest is deducted; which 
is the course pursued by the present bank of France, and by all 
the English banks, public and private; or else in lending at in- 
terest to solvent individuals, hke those of Scotland. Merchants 
of good credit are, in the latter way, supplied with the sums ne- 
cessary for their current expenses and payments, and each of 
them is thereby enabled to embark his whole capital in his com- 
mercial enterprises, without being obliged to reserve any part to 
meet the calls upon him in the course of business. The mer- 
chant of Paris or London must contrive matters, so as to have 
always on hand either in his private coffers or in the bank, a sum 
sufficient to face the demands upon him ; whereas, the merchant 
of Edinburgh is relieved from this necessity, and at liberty to in- 
vest the whole of his funds, in the confidence that the bank will 
advance him the money he may happen to require, (a) 

A bank of circulation affords the advantage of economizing 
capital, by reducing the amount of the sum, kept in reserve for 
the current and contingent expenses of the individuals it accom- 
modates. 

Bank bills or notes, payable on demand, and circulating as 
cash, play so important a part in the progress of national wealth, 
and have engendered such important errors in the brain of many 
writers of repute and information on other topics, that it will be 
worth while to examine their nature and consequences in a very 
particular manner. 

I should premise, that the residue of this section applies ex- 
clusively to bank-notes, depending solely upon the credit of the 
bank for their curency, and convertible at pleasure into cash or 
specie. 



(a) The two methods resolve themselves practically into one ; for mer- 
chants of good credit can always procure discountable paper ; and the sole 
essential difference is, that, in one case, the credit is individual and unevi- 
denced, in the other, evidenced, and, in most cases, joint also. The bank 
of England requires the names of more than one firm on the paper it dis- 
counts. Country bankers often content themselves with the security, or 
note of hand, of the borrower alone. T. 



222 ON PRODUCTION. book i. 

It is a matter no less of curiosity than of importance, to in- 
quire whether bank notes, or paper destitute of intrinsic value, 
be any addition to the stock of national wealth, and wliat, if any, 
is the possible extent of that addition; for, were there no limits 
to it, there could be no end to the wealth, that a state might ac- 
quire in a short time by the mere fabrication of some reams of 
paper. The solution of this grand problem may be set down as 
one of Smith's liappiest efforts; yet it is not every body, that 
comprehends his reasoning; I will try to render it more general- 
ly intelligible. 

The wants of a nation require a certain supply of each parti- 
cular commodity, and the extent of that supply is determined by 
the relative prosperity of the nation for the time being. A sur- 
plus of each of those commodities beyond this demand is either 
not produced at all, or, if produced, must occasion a decline of 
relative local value : it, therefore, naturally finds its way out of 
the country, and goes in quest of a market, where it may be in 
higher estimation. 

Money is, in this respect, like all other commodities; it is a 
convenient agent, and, therefore, employed as such in all opera- 
tions of exchange; but the intensity of the demand for it is deter- 
mined in each community, by the relative extent and activity of 
the exchanges negotiated within it. As soon as there is a sup- 
ply of money sufficient to circulate all the commodities there are 
to be circulated, no more money is imported; or, if a surplus 
flow in, it emigates again in quest of a market, where its value is 
greater, or where its utility is more desired. It is seldom or ne- 
ver that any body keeps in his purse or his coflfers more specie, 
than enough to meet the current demands of his business or con- 
sumption.* Every excess beyond these demands is rejected, as 
bearing neither utility nor interest; and the community at large 
is fully supplied with specie, as soon as each individual is pos- 
sessed of the portion suitable to his condition and relative station 
in society. 

It may be safely left to private interest, to make the best use 
of the excess of specie beyond the demand for circulation. The 
notion, that every item of specie, that crosses the frontier, is so 
much dead loss to the community, is just as absurd as the sup- 
position, that a manufacturer is so much the poorer, every time 
he parts with his money in the purchase of the ingredient or raw 
material of his manufacture ; or that individuals, the aggregate 
of whom makes up the nation, present foreigners gratuitously 
with all the money they part with. 

Taking it for granted, then, that the specie, remaining in cir- 
culation within the community, is limited by the national demand 
for circulating medium ; if any expedient can be devised, for sub- 

* No account is here taken of the money hoarded, which, for the nation- 
al interest, might just as well have remained in the mine. 



CHAP. XXII. ON PRODUCTION. 223 

stituting bank-notes in place of half the specie, or the commodi- 
ty, money, there will evidently be a superabundance of metal- 
money, and that superabundance must be followed by a diminu- 
tion of its relative value. But, as such diminution in one place 
by no means implies a cotemporaneous diminution in other places, 
where the expedient of bank-notes is not resorted to, and where, 
consequently, no such superabundance of the commodity, money, 
exists, money naturally resorts thither, and is attracted to the 
spot where it bears the highest relative value, or is exchangea- 
ble for the largest quantity of other goods : in other words, it 
flows to the markets where commodities are the cheapest, and 
is replaced by goods, of value equal to the money exported. 

The money, that can emigrate in this manner, is that part only 
of the circulating medium, which has a value elsewhere than 
within the limits of the nation ; that is to say, the specie or me- 
tal-money. Since, however, specie does not emigrate without 
an equivalent return; and, since its value, which before existed 
in the shape of specie, and was exclusively engaged in facilitat- 
ing circulation, thenceforth assumes the form of a variety of 
commodities, all items of the reproductive national capital, there 
follows this remarkable consequence; that the national capital is 
enlarged to the full amount of all the specie exported upon the 
introduction of the substitute. Nor is the internal national cir- 
culation at all cramped for want of money by this export; for the 
functions of the specie, that has been withdrawn, are just as well 
performed by the paper substituted in its stead. 

However valuable an acquisition the national capital may thus 
receive, it must not be rated above its real amount. I have sup- 
posed, for the sake of simplicity, that half the specie might be 
replaced by circulating notes : but this is a monstrous proportion ; 
particularly if it be considered, that paper can not retain its value 
as money any longer than while it is readily and instantly con- 
vertible into specie ; I say, readily and instantly, because other- 
wise people would prefer specie, which is at all times, and with- 
out the least hesitation, taken for money. To insure this requi- 
site convertibility, it is necessary, that, besides having at all 
times a fund in reserve, in private bills or securities, or in specie, 
sufficient to meet all the notes that may be presented, the bank 
itself should be at all times within reach of the holders of its 
notes. Therefore, if the territory be of any extent, and the 
notes so generally circulated, as to form half of the circulating 
medium, the subordinate offices of the bank must be greatly 
multiplied to place them within reach of all the note holders. 

But, granting the possibility of such an arrangement, and ad- 
mitting, that paper might supplant as much as half the requisite 
national currency of specie, let us see what would be the amount 
of the acquisition to the national capital. 

No writer of repute has ventured to estimate the requisite cir- 



224 ON PRODUCTION. book i. 

culating specie of any nation, higher than 1-5 of the annual na- 
tional product; some indeed have reckoned it as low as 1-30. 
Taking the highest estimate, viz. 1-5 of the annual product, 
which, for my own part, I consider greatly above the reality in 
any case; a nation, whose annual product should amount to 20 
miUions, would need but 4 millions of specie. Therefore, in 
case the half, or 2 millions, were supplanted by circulating paper, 
and employed in augmenting the national productive capital, that 
capital would be once for all augmented, by a value equal to 2-20 
or 1-10 of the annual product of the nation. 

Again, the annual product of a nation would, probably, be 
much over-rated at 1-10 of the gross national productive capital; 
but let it be set down at that rate, allowing 5 per cent, interest 
on productive capital, and 5 per cent, wages and profits of the 
industry it sets in motion. On this calculation, supposing the 
paper substitute to add to the national capital, in the ratio of 1-10 
of its annual product, this addition will not, at the highest esti- 
mate, exceed 1-100 of the previous capital. 

Although the practicable issue of bank-notes procures to a na- 
tion of moderate wealth an accession of capital, much less con- 
siderable than people may fondly imagine, this accession is, not- 
withstanding, of very great value; for, unless the productive 
energy of the nation be extremely great, as in Great Britain, or 
the national spirit of frugality very general and persevering, as in 
Holland, the annual savings withdrawn from unproductive con- 
sumption, to be added to productive capital, form, even in thriv- 
ing states, a very inconsiderable portion of the gross annual re- 
venue. Nations, whose production is stationary, as every body 
knows, make no addition to their productive capitals; and the 
consumption of those on the decline annually encroaches on their 
capitals. 

Should the paper-issues of a bank at any time exceed the de- 
mands of circulation, and the credit enjoyed by the establishment, 
there follows a perpetual reflux of its notes, and it is put to the 
expense of collecting specie, which is absorbed as fast as collect- 
ed. The Scotch banks, though productive of great benefit, have 
been obliged, upon such trying occasions, to keep agents in Lon- 
don constantly employed, in scraping specie together at a charge 
of two per cent., which specie was instantly absorbed. The bank 
of England, in similar circumstances, was under the necessity of 
buying gold bullion, and getting it coined; and this coin was 
melted again as fast as it was paid by the bank, in consequence 
of the high price of the metal, which was itself the effect of the 
constant purchases made by the bank, to meet the calls upon it 
for specie. In this manner, it sustained the annual loss of from 
2| to 3 per cent., upon a sum of about 850,000/.,* more than 20 

* Wealth of Nations, book ii. c. 2. 



CHAP. XXII. ON PRODUCTION. 225 

millions of our money. I say nothing of the situation of this bank 
of late years, since its notes have acquired a forced circulation, 
and, consequently, altered their nature entirely. 

The notes issued by a bank of circulation, even if it have no 
funds of its own, are never issued gratuitously; and, therefore, 
of course, imply the existence, in the coffers of the bank, of a 
value of like amount, either in the shape of specie, or of securi- 
ties, bearing interest; upon which latter only the whole real ad- 
vance of the bank is made; and this advance can never be made 
upon securities that have a long time to run ; for the securities 
are the fund, that is to provide for the discharge of another class 
of securities, in the hands of the public at large, payable at the 
shortest of all possible notice ; viz., at sight. Strictly speaking, 
a bank can not be at all times in a condition to face the calls upon 
it, and deserve the entire confidence of the public, unless the 
private paper it has discounted, be all, like its own notes, paya- 
ble at sight; but, as it is no easy matter to find substantial as- 
sets, that shall bear interest, and at the same time be redeemable 
at sight, the next best course is to confine its issues to bills of 
very short dates; and, indeed, well-conducted banks have always 
rigidly adhered to this principle. 

From the preceding considerations may be deduced a conclu- 
sion, fatal to abundance of systems and projects, viz. that credit- 
paper can supplant, and that but partially, nothing more than that 
portion of the national capital performing the functions of money, 
which circulates from hand to hand, as an agent for the facility 
of transfer ; consequently, that no bank of circulation, or credit- 
paper of any denomination whatever, can supply to agricultural, 
manufacturing, or commercial enterprise, any funds for the con- 
struction of ships or machinery, for the digging of mines or ca- 
nals, for the bringing of waste land into cultivation, or the com- 
mencement of long-winded speculations ; any funds, in short, to 
be employed as vested capital. The indispensable requisite of 
credit-paper is, its instant convertibility into specie ; when the 
sum total of the paper issued does not exist in the coffers of the 
bank, under the shape of specie, the deficit should at least be 
supplied by securities of very short dates ; whereas, an estab- 
lishment, that should lend its funds to be vested in enterprises, 
whence they could not be withdrawn at pleasure, could never 
be prepared with such securities. An example will illustrate this 
position. Suppose a bank of circulation to lend 30,000/r. of its 
notes, circulating as cash, to a landholder on mortgage of his 
land, presenting the amplest security. This loan is destined by 
the landholder to the construction of necessary buildings, for the 
cultivation of the estate ; for which purpose he contracts with a 
builder, and pays him the 30,000/r. of notes advanced by the 
bank. Now, if the builder, after a shckt lapse of time, be desir- 
ous of turning the notes into specie, the bank can not pay him 

37 



226 ON PRODUCTION. book i. 

by a transfer of the mortgage. The only property the bank has 
to meet the 30,000 /r. of notes is a security, ample beyond doubt, 
but not available at the moment. 

The securities in the hands of a bank, I hold to be a solid ba- 
sis for the whole of its issues of notes, provided those securities 
be of solvent persons, and have not too long to run ; for the se- 
curities will be redeemed either with specie, or with the notes of 
the bank itself. In the first case, the bank is supplied with the 
means of paying its notes ; in the second, it is saved the trouble 
of providing for them. 

If, by any circumstance, the notes be deprived of their power 
of circulating as specie, the task of replacing the metal for 
the paper-money does not devolve upon the bank ; nor was it at 
the first saddled with the business of turning to account the metal 
money its notes rendered superfluous. For, as we have already 
observed, the bank can extinguish the whole of its paper with 
the private securities it holds. The inconvenience falls upon the 
public, which is under the necessity of finding a new agent of 
circulation, either by a re-import of the metal-money, or by the 
substitution of private paper ; but probably the public would, in 
such circumstances, apply again to a bank conducted on sound 
principles.* 

This will serve to explain, why so many schemes of agricul- 
tural banks for the issue of circulating and convertible notes on 
ample landed security, and so many other schemes of a similar 
nature, have fallen to the ground in very little time, with more or 
less loss to the shareholders and the publicf Specie is equiva- 
lent to paper of perfect solidity, and payable at the moment ; 
consequently it can only be supplanted by notes of unquestion- 
able credit, and payable on demand ; and such notes can not be 
discharged by a bare security, even of the best possible kind. 

For the same reason, bills of exchange in the nature of ac- 
commodation-paper, as it is called, can never be a sound basis 
for an issue of convertible paper. Such bills of exchange are 

* Since the first publication of this passage, this very circumstance has 
happened in respect to the bank of Paris, in 1814 and 1815, when that ca- 
pital was besieged and occupied by the allied armies. The advances of the 
bank to the government, and to individuals, which could not be recalled 
immediately, did not exceed the capital of the establishment, for vi^hich the 
share-holders can not be called upon ; and its paper-issues, payable to bearer, 
were all covered, either by specie in hand, or by commercial paper of short 
dates. By this means, notwithstanding the very critical circumstances of 
the moment, the merchants continued to employ its notes ; which they 
could not well do without ; and they were paid as usual in cash without in- 
terruption, during the whole of the hostile occupation: which shows at 
once the utility of a bank of circulation, and the advantage of leaving invio- 
late the convertibility of its paper-issues. 

t In 1803, the land-bank of Paris was, for this reason, obliged to suspend 
the payment of its notes in cash ; and to give notice, that they would be 
paid off by instalments out of the proceeds of its real securities. 



cuAP. xxn. ON PRODUCTION. , 227 

paid when due by fresh bills, that have a further term to run, and 
are negotiated with the deduction of discount. When the latter 
fall due, they are met by a third set payable at a still later date, 
which are discounted in like manner. If the bank discounts 
such bills, the operation is no more than an expedient for bor- 
rowing of the bank in perpetuity ; the first loan being paid with 
a second, the second with a third, and so on. And the bank ex- 
periences the evil of issuing more of its notes, than the circula- 
tion will naturally absorb, and the credit of the establishment 
will support ; for the notes, borrowed upon such bilL>, do not 
help to circulate and diffuse real value, because they represent 
and contain no real value themselves ; consequently, they conti- 
nually recur to be exchanged for specie. It is on this account, 
that the discount-bank of Paris, while it continued to be well ad- 
ministered, did, as the present banks of France and of England 
do still refuse, as far as it is able, to discount accommodation- 
paper. 

The consequences are similar and equally mischievous, when 
a bank makes advances to government in perpetuity, or even for 
a very long period, (a) This was the cause of the failure of the 
bank of England. Not being able to obtain payment from go- 
vernment, it was unable to withdraw the notes in which the loan 
was made. From that moment its notes ceased to be convertible; 
they have since enjoyed a forced circulation. The government, 
being itself unable to supply the bank with the means of payment, 
discharged that body from its liability to its own creditors.* 

* Thornton, in his tract on the Paper Credit of Great Britain, written ex- 
pressly with a \\qw to justify the suspension of cash-payments by that es- 
tablishment, has attacked the positions of Smith upon this subject. He tells 
us, that the extraordinary run upon the bank, which brought about the 
suspension, was occasioned, not by the excess of its issues, but, on the con- 
trary, by their partial contraction. ' An excessive limitation of bank-notes,' 
he observes, ' wiU produce failures, failures must cause consternation, and 
consternation must lead to a nm upon the bank for guineas.' By this refer- 
ence to an extreme case, he endeavours to support his paradoxical opinions. 
When a convertible paper has succeeded in driving out of the country too 
large a portion of the metallic money, and the confidence in the paper hap- 
pens suddenly to decline, great confusion and embarrassment will doubt- 
less ensue, because the remaining agent of circulation is insufficient to 
effect the business ; but it is a great mistake to suppose, that the deficien- 



(fl) That is to say, advances its notes. A bank, like an individual, may 
advance its capital, which then becomes more or less vested and fixed. The 
whole capital of the bank of England has been thus advanced ; and there 
would have been no danger, had it not advanced its notes also. When the 
advances of paper are made upon transferable securities, stock, exchequer 
bills, and the like, those securities may be sold for cash, or for the notes of 
the bank itself, so long as they retain their value, and thus the safety and 
solvency of the bank maintained. But this operation is unnecessarily com- 
plex ; for the government might itself have sold, and thus have savea the 
brokerage or profit accruing upon the operation to the bank. T. 



228 ON PRODUCTION. book i. 

The holders of the notes of a bank issuing convertible paper 
run little or no risk, so long as the bank is well administered, 
and independent of the government. Supposing a total failure 
of confidence to bring all its notes upon it at once for payment, 
the worst that can happen to the holders is, to be paid in good 
bills of exchange at short dates, with the benefit of discount ; 
that is to say, to be paid with the same bills of exchange, where- 
on the bank has issued its notes, (a) If the bank have a capital 
of its own, there is so much additional security, but, under a 
government subject to no control, or to nominal control only,* 
neither the capital of the bank, nor the assets in its hands, offer 
any solid security whatever. The will of an arbitrary prince is 
all the holders have to depend upon ; and every act of credit is 
an act of imprudence. 

As far as I am capable of judging, such is the effect of banks 
of circulation and of their paper issues upon individual and na- 
tional wealth. This effect is described by Smith in a quaint and 
ingenious metaphor. The capital of a nation he likens to an ex- 
tensive tract of country, whereupon the cultivated districts repre- 
sent the productive capital, and the high roads the agent of circu- 
lation, that is to say, the money, that serves as the medium to 

cy can be remedied by the multiplication of a paper, not enjoying the con- 
fidence of the piiblic. If the bank of England was able to survive the 
shock, it was because of the indispensable necessity of some agent of trans- 
fer, of some money or other, of paper in default of all others, in so commer- 
cial a country ; because the government and the bankers of London, who 
were interested in the safety of the bank, unanimously agreed not to call 
upon it for cash, until it should be in a condition to pay ; that is to say, 
until the government should have paid its advances in actual value. The 
bank had lent to the government more than its whole capital ; for to that 
extent it might have gone with safety, its capital not being wanted for the 
discharge or convertibility of its paper ; had it not so done, the short bills 
in its possession would have been sufficient for the extinction of its con- 
vertible paper. 

* At the period of my writing, the Parliament of Great Britain repre- 
sents the interests, not of the nation, but of the ministry, which is an oli- 
garchical faction, nominated by the king. 



(a) Our author's view of the virtual constitution of this country is theo- 
retically just ; and would be practically so, were there not another power, 
that really directs the public councils, though in a very inefficient and 
clumsy manner. The representative body represents, not interests but per- 
sons, and is wholly at the beck of any degree of folly or wickedness that 
may happen to get into office. But violent abuses generate violent reme- 
dies ; and, as the despot in Turkey is controlled by the fear of the bow- 
string, so the corruption of an ill-chosen legislature is checked by public 
opinion, animated by freedom of speech and of the press. The legislative 
body is of little use, but as a means of rousing the energy of public opinion. 
Were the doors of Parliament closed, the paper of England might soon be- 
come as little effisctual, as one that should be issued by the Ottoman Porte, 
or the Sophi. Whence may be seen the absolute necessity of preserving, at 
all hazards, the sole remaining check to abuse and national decay. T. 



CHAP. XXII. ON PRODUCTION. 229 

distribute the produce among the several branches of society. 
He then supposes a machine to be invented, for transporting the 
produce of the land through the air ; that machine would be the 
exact parallel of credit-paper. Thenceforward the high roads 
might be devoted to cultivation. ' The commerce and industry 
of the country, however,' he continues, ' though they may be 
somewhat augmented, can not be altogether so secure, when 
they are thus, as it were, suspended upon the Daedahan wings of 
paper-money, as when they travel about upon the solid ground 
of gold and silver. Over and above the accidents, to which they 
are exposed from the unskilfulness of the conductors of this 
paper-money, they are liable to several others, from which no 
prudence or skill of those conductors can guard them. An un- 
successful war, for example, in which the enemy got possession 
of the capital, and consequently of that treasure, which support- 
ed the credit of the paper-money, would occasion a much great- 
er confusion in a country, where the whole circulation was car- 
ried on by paper, than in one, where the greater part of it was 
carried on by gold and silver. The usual instrument of com- 
merce having lost its value, no exchanges could be made but 
either by barter or upon credit. All taxes having usually been 
paid in paper-money, the prince would not have wherewithal 
either to pay his troops, or to furnish his magazines ; and the 
state of the country would be much more irretrievable, than if 
the greater part of its circulation had consisted in gold and silver. 
A prince, anxious to maintain his dominions at all times in the 
state, in which he can most easily defend them, ought upon this 
account to guard, not only against that excessive multiplication 
of paper money, which ruins the very banks which issue it, but 
even against that multiplication of it, which enables them to fill 
the greater part of the circulation of the country with it.'* (a) 

Forgery alone is enough to derange the affairs of the best con- 
ducted and most solid bank. And forgery of notes is more to be 
apprehended, than counterfeits of specie. The stimulus of gain 
is greater. For there is more profit to be made by convert- 
ing a sheet of paper into money, than by giving the appearance 
of precious metal to another metal, that has some though very 
little, intrinsic value, especially if it be compounded or covered 

* Wealth of Nations, book ii. c. 2. 



(a) Smith is here speaking of convertible paper, which is never paper- 
money. The difference is now beginning to be understood ; in his time it 
was not perceived, although he instances the English colonies of North 
America, as having established an iriconvertible paper. Most of the incon- 
veniences he mentions with regard to convertible, attach also to incon- 
vertible paper ; which is also more liable to excessive issue, and to the 
abuse of the public authority. But it has advantages not possessed by its 
precursor, convertible paper. T. 



230 ON PRODUCTION. book i. 

with a small portion of the counterfeited metal; and perhaps, too, 
the materials for the former operation are less liable to discove- 
ry. Besides, the counterfeits of specie can never reduce the 
value of the specie itself, because the latter has an intrinsic and 
independent value as a commodity; whereas, the mere belief 
that there are forged notes abroad, so well executed, as to be 
scarcely distinguishable from the genuine, is enough to bring 
both forged and genuine into discredit. For which reason, banks 
have sometimes preferred the loss of paying notes they know to 
be forged, to the hazard of bringing the genuine ones into discre- 
dit, by the exposure of the fraud, (a) 

One method of checking the immoderate use of notes is, to 
limit them to a fixed and high denomination of value; so as to 
make them adapted to the circulation of goods from one mer- 
chant to another, but inconvenient for the circulation between 
the merchant and the consumer. It has been questioned whe- 
ther a government has any right to prohibit the issue of small 
notes, while the public is willing to take them; and whether such 
limitation be not a violation of that liberty of commerce, which it 
is the chief duty of a government to protect. But the right un- 
doubtedly is just as complete, as that of ordering a building to be 
pulled down, because it endangers the public safety. 



SECTION IV. 

Of Paper-Money. 

The distinctive appellation of paper- money, I have reserved 
exclusively for those obligations, to which the ruling power may 
give a compulsory circulation in payment for all purchases, and 
discharge all debts and contracts, stipulating a delivery of money. 
I call them obligations, because, though the authority that issues, 
is not bound to redeem them, at least not immediately, yet they 
cornraonly express a promise of redemption at sight, which is 
absolutely nugatory ; or of redemption at a date expressed, for 

(a) The past experience of England has shown, that the danger of forge- 
ry is far less than our author seems to imagine ; for, with the most mode- 
rate skill of execution, it has been unable materially to affect the value of 
the paper at large even when that paper was most abundant. An experi- 
ment is about to be tried, for the further reduction of this danger, and with 
every prospect of success. The injury to morals, and increase of crime and 
punishment, has, indeed, been most calamitous, but it must be remember- 
ed, that this branch of criminality only has thriven, and that others have 
been wonderfully checked. Highway* robbery has almost ceased , and no 
better engine of police could have been devised, for the detection of fraud 
or spoliation, than a paper-money well conducted. The projected improve- 
ment in the execution, it is hoped, will check the crime of forgery, without 
reducing the present check upon all other branches of criminality. T. 



CHAP. xxTi. ON PRODUCTION. 231 

which there is no sort of security; or of territorial indemnity, the 
value of which we shall presently inquire into. 

Such obligations, whether subscribed by the government or by 
individuals, can be converted into paper-money by the public 
authority only, which alone can authorize the owners of money 
to pay in paper. The act is, indeed, an exertion, not of legiti- 
mate, but of arbitrary authority; being a deterioration of the na- 
tional money in the extreme degree. 

Upon the principles above established, it should seem, that a 
money destitute of all value as a commodity, ought to pass for 
none in all free dealing subsequent to its issue; and this is always 
the case in practice sooner or later. The notes of what was im- 
properly called Law's Bank, and the assigndts issued during the 
French revolution, were never regularly called in or cancelled; 
yet those of the highest denomination would not pass at present 
for a single sol. How then, came they ever to pass for more 
than their real value'^ Because there are many expedients of 
fraud and violence, which will always have a temporary efficacy. 
In the first place, a paper, wherewith debts can be legally, 
though fraudulently, discharged, derives a kind of value from 
that single circumstance. Moreover, the paper-money may be 
made efficient to discharge the perpetually recurring claims of 
public taxation. Sometimes a tariffe or maximum of price is es- 
tablished; which, indeed, soon extinguishes the production of the 
commodities affected by it, but gives to the paper-money a por- 
tion of the value of those actually in existence. Besides, the very 
creation of a paper-money with forced circulation occasions the 
disappearance of metallic money; for, as it is made to pass at par 
with the paper, it naturally seeks a market, where it can find its 
true level of value. The paper-money is thus left in the exclu- 
sive possession of the business of circulation ; and the absolute 
necessity of some agent of transfer, in every civilized community, 
will then operate to maintain its value.* So urgent is this ne- 

* Wherever a paper-money has been established, the difference between 
its value in the home market, where it has utility, and its value in foreign 
markets, where it has no utility, has afforded a fruitful field for speculation, 
that has enriched many adventurers. In 1811, 100 guineas in gold would 
purchase at Paris a bill of exchange on London, for 140L sterling, payable 
in the paper which was the only currency of England. Yet the difference 
between gold and paper in the London market at the same period, was only 
15 per cent. It was in this way, that the paper was of higher value in 
England than abroad. Accordingly, I find from returns with which I have 
been favoured, that gold in guineas or bullion was smuggled into the ports 
of Dunkirk and Gravelines alone, in the years 1810, 11, 12, and 13, to the 
amount of 182,124,444 /r. There was a similar speculation in other com- 
modities at large ; but it was attended with more risk and difficulty ; the 
import into France being very hazardous, although the export from England 
was encouraged in every possible way. Yet this traffic would soon have 
found its level, for it must have produced bills on ^England in such quantity, 
as to have brought the exchange to par at least, had not the continental 
subsidies of England furnished a continual supply of bills on London with, 
out any return. 



232 ON PRODUCTION. book i. 

cessity, that the paper-money of England, consisting of the notes 
of the bank, has been kept at par with specie, simply by the limit- 
ation of the issues to the demands of circulation. 

Nations precipitated into foreign wars, before they have had 
time previously to accumulate the requisite capital for carrying 
them on, and destitute of sufficient credit to borrow of their neigh- 
bours, have almost always had recourse to paper money, or some 
similar expedient. The Dutch, in their struggle with the Span- 
ish crown for independence, issued money of paper, of leather, 
and of many other materials. The United States of America, 
under similar circumstances, likewise had recourse to paper-mo- 
ney ; and the expedient, that enabled the French republic to foil 
the formidable attack of the first coalition, has immortalized the 
name of assigndts. 

Law has been unjustly charged with the whole blame of the 
calamities resulting from the scheme that bears his name. — 
That he entertained just ideas respecting money, may be gather- 
ed from the perusal of a tract* he published in his native country, 
Scotland, to induce the Scotch government to establish a bank 
of circulation. The bank established in France, in 1716, was 
founded on the principles there set forth. Its notes were ex- 
pressed in these words : 

_ " The Bank promises to pay the bearer at sight ****** 
livres in money of the same weight and standard as the money 
of this day. Value received at Paris, " &c. 
■ — The bank, which was then but a private association, paid its 
notes regularly on demand: they were not yet metamorphosed in- 
to paper-money. Matters remained on this footing, and went on 
very well, till the year 1719 ;| at which period the king, or ra- 
ther the regent, repaid the shareholders, and took the manage- 
ment into his own hands, calling it the Hoyal Bank. The notes 
were then altered to this form : 

" The Bank promises to pay the bearer at sight ****** 
livres in silver coin. Value received at Paris, " &c. 
— This alteration, slight as it was in appearance was a radical 
one in substance. The first note stipulated to pay a fixed quan- 
tity of silver, viz. the quantity contained in the livres current at 
the date of issuing the notes. The second merely engaged to 
pay livres, and so opened a door for whatever alterations an ar- 
bitrary power might think proper to make in the real value ex- 
pressed by the word livre. And this was called fixing the rate 
of the paper-money ; whereas, on the contrary, it was unfixing, 
and making it a fluctuating value ; and the fluctuations were tru- 

* This work was translated into French while Law continued in the office 
of Controller-General of France ; and is entitled Considerations on Commerce 
and Money. 

t Vide Dutot. torn. ii. p, 200, for a detail of the beneficial effects of the 
institution, as originally conducted. 



CHAP. XXII. ON PRODUCTION. 489 

ly deplorable. Law strenuously opposed the innovation ;^ but 
principle was compelled to give way to power ; and the crimes 
of power, when the consequences began to be felt, were confi- 
dently attributed to the fallacy of the principle. 

The assigndts issued by the revolutionary government were 
worth even less than the paper-money of the regency. The lat- 
ter gave a promise, at least, of paying in silver: and, though the 
payment might be greatly curtailed by a deterioration of the sil- 
ver-coin, yet sooner or later the paper might have been redeem'- 
ed, if the government had but been more moderate in its issues-, 
and more scrupulous in fulfilling its engagements. But the as- 
signdts conveyed no right to call for silver ; nothing but a right 
to purchase or obtain the national domains. Let us see what 
this right was really worth. 

The original assigndts purported to be payable at sight, the 
Caisse de V Extraordinaire, where they were, in fact, never paid 
at all. It is true, they were received in payment for the nation- 
al domains bought by individuals ai a competition-price; but the 
value of these domains could never give any determinate value 
to the assigndts, because their nominal value increased exactly 
in proportion as that of the assignats declined. The government 
was not sorry to find the price of national domains advance, be- 
cause it was thereby enabled to withdraw a greater amount of 
assigndts, and consequenly, to re-issue new ones, without enlarg- 
ing the quantity afloat. — It was not aware, that, instead of the 
national domains advancing in price, the assigndts were under- 
going a rapid depreciation, and that the fiirther that depreciation 
was pushed, the more assigndts must be issued in payment of an 
equal quantity of supplies. 

The last assigndts no longer purported to be payable at sight. 
The alteration was little attended to, because neither first nor 
last were, in t''act, ever paid at all. But their vicious origin was 
made more apparent. The paper contained these words: 

" National domains — Jissigndt of one hundred /rancs," &c. — 
Now, what was the meaning of the term one hundred /rar?cs? 
What value did they convey the notion of? Was it the value of the 
quantity of silver, heretofore known under the designation of one 
hundred /mncs? No; for 100 /r. could not possibly be obtain- 
ed with an assignat to that amount. Did it convey the idea of 
as much land, as might be purchased for 100 /r. in silver? Cer- 
tainly not; for that quantity of land could no more be obtained, 
even from the government, by an assigndt of 100 //■., than 100 
fr. in specie. The domains were disposed of at public auction 
for as many assigndts as they would fetch; and the value of this 
paper had latterly so far declined, that one of 100/r. would not 
buy an inch square of land. 

In short, setting aside all consideration of the discredit attach- 
ed to that government, the sum expressed in an (uiigndt pre- 
ss 



234 ON PRODUCTION. book i. 

sented the idea of no definite value whatever; and those securi- 
ties could not but have fallen to nothing, even had the govern- 
ment inspired all the confidence, of which it was so eminently 
destitute. The error was discovered in the end, when it was 
impossible any longer to purchase the most trifling article with 
any sum of assigndts, whatever might be its amount. The next 
measure was to issue manddts, that is to say, papers purporting 
to be an order for the absolute transfer of the specific portion of 
the national domains expressed in the manddt : but, besides that 
it was then too late, the operation was infamously executed. 



BOOK 11. 

OF THE DISTRIBUTION OF WEALTH. 



CHAPTER 1. 

OP THE BASIS OP VALUE ; AND OP SUPPLY AND DEMAND. 

The principal phenomena of production have been investigat- 
ed in my first book ; wherein I have shown how human indus- 
try, with the aid of capital and of natural agents and properties, 
creates every kind of utihty, which is the primary source of va- 
lue; and in what way social institutions and public authority ope- 
rate to the benefit or the prejudice of production. This second 
book will be devoted to the consideration of the distribution of 
wealth: to which end it will be necessary, first, to analyze the 
nature of value, the object of distribution; secondly, to ascertain 
the laws, which regulate the distribution of value, when once 
created amongst the various members of society, so as to con- 
stitute individual revenue. 

The valuation of an object is nothing more or less than the af- 
firmation, that it is in a certain degree of comparative estimation 
with some other specified object; and any other object possessed 
of vakie may serve as the point of comparison. A house, for 
instance, may be valued in corn or in money. To say that it is 
worth 20,000 fr. conveys a more accurate notion of its value, 
than to say that it is worth 1000 hectolitres of wheat, solely be- 
cause the habit of reckoning the value of all commodities in coin 
makes it easier for the mind to form an idea of the value of 
20,000 /?\ in other commodities, that is to say, of the quantity of 
other commodities obtainable for that sum, than of that obtaina- 
ble for 100 heciol, of wheat. Yet if wheat be 20/r. the hectol.f 
the degree of value expressed by each is the same. 

In every act of valuation, the object valued is the fixed datum. 
In the instance first given, the house is the datum : it is a defi- 
nite amount of materials, put together in a definite manaer, upon 
a definite site. But the point of comparison is variable in amount, 



236 ' ON DISTRIBUTION. book ir. 

according to the degree of estimation in the mind of the valuer. 
If vaUied at 20,000 /r. the house is reckoned to be equivalent to 
so many pieces of silver coin of the weight of 5 grammes, with a 
mixture of 1-10 alloy; if at 22,000 /r. or 18,000/r. it is but a va- 
riation of the quantity of the commodity, that is the specific point 
of comparison. So likewise, if that point be wheat, the varia- 
ble quantity of that commodity would express the degree of 
value. 

Valuation is vague and arbitrary, when there is no assurance 
that it will be generally acquiesced in by others. The owner of 
the house may reckon it worth 22,000 fr. while an indifferent 
person would value it at no more than 18,000/r., and probably 
neither would be right. But if another, or a dozen other persons 
be willing to give for it a specific amount of other commodities, 
say 20,000 /r. or 1000 hectol. of wheat, we may conclude the 
estimate to be a correct one. A house that will fetch 20,000 /r. 
in the market is worth that sum.* — But if one bidder only will 
give that price, and he is unable to re-sell it without loss, he will 
give more than it is worth. The only fair criterion of the value 
of an object is, the quantity of other commodities at large, that 
can be readily obtained for it in exchange, whenever the owner 
wishes to part with it; and this, in all commercial dealings, and 
in all money valuations, is called the current price.'f 

What is it, then, that determines this current price of commo- 
dities'? 

The want or desire of any particular object depends upon the 
physical and moral constitution of man, the climate he may live 
in, the laws, customs, and manners of the particular society, in 
which he may happen to be enrolled. He has wants, both cor- 
poreal and intellectual, social and individual; wants for himself 
and for his family. His bear-skin and reindeer are articles of 
the first necessity to the Laplander; whilst their very name is 

* My brother, Louis Say, of ISTantes, has attacked this position in a short 
tract, entitled, Principales Causes de la Richesse et de la Misere des Pieu- 
phs et des Paiticulie'rs, 8vo. Paris. Determlle. He lays down the maxim, 
that objects are items of wealth, solely in respect of their actual utility, and 
not of their admitted or recognised utility. In the eye of reason, his posi- 
tion is certainly correct ; but, in this science, relative value is the only 
guide. Unless the degree of utility be measured by the scale of compari- 
son, it is left quite indefinite and vague, and, even at the same time and 
place, at the mercy of individual caprice. The positive nature of value was 
to be established, before political economy could pretend to the character 
of a science, whose province it is to investigate its origin, and the conse- 
quences of its existence. 

•fin the earlier editions of this work, I had described the measure of va- 
lue to be the value of the other product, that was the point of comparison, 
which was incorrect. The quantity and not the value of that other product, 
is the measure of value in the object of valuation. This mistake gave rise 
to much ambiguity of demonstration, which the severity of criticism, both 
fair and unfair, has taught me to correct. Fas est et ah hoste doceri. 



CHAP, u ON DISTRIBUTION. 237 

unknown to the lazzarone of Naples, who cares for nothing in 
the world if he get but his meal of macaroni. In Europe, courts 
of justice are considered indispensable to the maintenance of so- 
cial union; whereas the Indian of America, the Tartar, and the 
Arab, feel no want of such establishments. It is not our busi- 
ness here to inquire, wherein these wants originate; we must 
take them as existing data, and reason upon them accordingly. 

Of these wants, some are satisfied by the gratuitous agency 
of natural objects ; as of air, water, or solar light. These may 
be denominated natural wealth, because they are the spontaneous 
offering of nature ; and, as such, mankind is not called upon to 
earn them by any sacrifice or exertion whatever ; for which rea- 
son, they are never possessed of exchangeable value. Other 
wants there are, that can only be satisfied by the employment of 
objects possessed of an utility, which they could not have been 
invested with without some modification by human agency, — 
without having undergone some change of condition, and with- 
out some difficulty havmg been surmounted for the purpose. Of 
this kind are the products of agriculture, commerce, and manu- 
facture, in all their infinite ramifications. To them alone is any 
value attached ; and for a very obvious reason ; because the very 
act of production implies an act of mutual exchange, in which 
the producer has given his personal agency for the product ob- 
tained by its exertion. Wherefore, he will hardly resign it with- 
out receiving what is, in his estimation, an equivalent. These 
may be called, social wealth, both because an act of exchange is 
in itself a social act, and because exclusive property in the pro- 
duct obtained by personal exertion, or by an act of exchange, can 
only be secured by social institutions. Social wealth, it is to be 
observed, is the only part of human wealth, that can form the 
subject of scientific research. 1. Because it is the only part 
that is the object of human estimation, or at least of such estima- 
tion, as is not altogether arbitrary and mental. 2. Because it is 
the only one which is created, distributed, and destroyed, accord- 
ing to any rules that can be assigned by human science. 

The knowledge of the ground-work of the quahty, value, or 
rather exchangeable value, leads to the perception of its origin. 
The items of social wealth are invested with value by the neces- 
sity of giving something to obtain them; and that something is 
productive exertion. When once obtained, when this sacrifice 
has been made in the attainment, the party is really more 
wealthy ; he has wherewithal to satisfy more wants ; and, if the 
object obtained by this sacrifice be unsuited to the personal wants 
of the owner, he may make use of it for the attainment of some 
object of personal desire, by the way of exchange for some other 
product ; which other product will itself be the result of similar 
productive exertion ; so that, in fact, the exchange will be a mere 
mutual transfer of the productive exertion on either side, where- 



23S ON DISTRIBUTION book ir. 

of the two products respectively are the result. When 15 Mlogr. 
of wheat are given for 1 Mlogr. of coffee, there is a mere trans- 
fer of the productive agency exerted in creating the one, for that 
exerted in the creation of the other.* 

Wherefore, there is a current value or price established for 
productive service as well as for products. For, if the agency 
exerted in the creation of 15 Mlogr. of wheat can obtain as its 
reward, in the way of exchange, either 15 Mlogr. of wheat or 1 
Mlogr. of coffee indifferently, what is there to prevent its obtain- 
ing in the same way any other equivalent product, say a yard of 
cotton cloth, 5 yards of ribbon, a dozen plates, or any thing else? 
Should the 15 Mlogr. of wheat be exchangeable for a less 
amount of any of these commodities respectively, the productive 
agency exerted in the creation of wheat would be proportionately 
less rewarded, than that exerted in the creation of the specific 
commodity; and a portion of the former would be attracted to the 
latter branch of production, until the recompense of labour in 
each department should find its fair level. 

Each class of productive agency has a current price peculiar 
to itself. If the productive agency exerted in the production of 
15 Mlogr. of wheat can obtain for itself but 1-15 of its own pro- 
duct, it will be entitled to no more than 1-15 of thp value of any 
other product obtainable by exchange for that quantity of wheat; 
for instance, to 1-15 of 4/r., and so of other products. 

Thus it is obvious, that the current value of productive exer- 
tion is founded upon the value of an infinity of products compar- 
ed one with another •^'\ that the value of products is not founded 
upon that of productive agency, as some authors have erroneously 
affirmed ;J and that, since the desire of an object, and conse- 
quently its value, originates in its utility, it is the ability to create 
the utihty wherein originates that desire, that gives value to pro- 
ductive agency ; which value is proportionate to the importance 
of its co-operation in the business of production, and forms, in 

\ * It is scarcely necessary to mention, that when commodities are ex- 
jchanged, not for one another, but for money, the case is nowise varied. 
(No seller ever takes money for his own consumption, or for any other pur- 
Ipose, than as an object of a second exchange ; so that, in reality, the pro- 
duct sold is exchanged for the product bought with the price. When 15 
\Uogr. of wheat have been sold for 4/r. and 1 kilogr. of coffee bought with 
t1^at 4/r., the wheat has actually been bartered for the coffee, and the mo- 
ntey that has intervened has withdrawn itself as completely, as if it had 
never appeared at all in the transaction. Wherefore it is quite correct to 
say, that relative value is determined by the relation of commodities one to 
another, and not solely by that of each commodity to money. 

t It must not be inferred from this passage, that I mean to say, that the 
productive agency exerted in raising a product, whose charges of produc- 
tion have amounted to 4 fr. although it is saleable for 3 fr. only, is there- 
fore worth but 3/r. My position merely implies, that this amount of pro- 
ductive service has, in such case, raised a value of 3/r. only, though it might 
have raised a value of 4/r. 

t Ricardo, Prin. Pol, Econ. and Taxation. 



CHAP. I. ON DISTRIBUTION. 239 

respect to each product individually, what is called, the cost of 
its production. 

The utility of a product is not confined to one human being, 
but applies to a whole class of society at the least, as in the case 
of particular articles of clothing ; or to a whole community, as in 
that of most of the articles of food that are adapted to human 
consumption in general, without distinction of sex or age. For 
this reason, the demand for a specific object, or product, or act 
of productive exertion, has a certain degree of extent. The ag- 
gregate demand for sugar in France is said to exceed 500,000 
quintals per annum. Even the individual demand of a specific^ 
product for individual consumption may be more or less urgent.! 
Whatever be its intensity, it may be called by. the general name 
of demand; and the quantity attainable at a given time, and ready 
for the satisfaction of those who are in want of the specific article, 
may be called the supply or amount in circulation. 

But this rnust be understood with some limitation ; for there 
is no object of pleasure or utility, whereof the mere desire may 
not be unlimited, since every body is always ready to receive 
whatever can contribute to his benefit or grtitification. There 
must, therefore, be some bounds to demand ; and the most effect- 
ual limitation is, the ability to give some other equivalent product 
for the object of desire. All the porters in a commercial city 
might desire to have a coach and six for the more comfortable 
execution of their business, without raising the price of horses 
and carriages a tittle. The objects, which each individual has 
to give as an equivalent for the object of his desire, are no other 
than the products of his own productive means, which are limited 
even in the case of the most wealthy member of society. 

Wealth is, in all countries, distributed in every degree of gra 
dation, from the populous level of mediocrity to the solitary pin- 
nacle of extreme affluence. Accordingly, the products most ge 
nerally desirable are really demanded by a limited number only, 
because they alone have wherewithal to obtain them ; and even 
their ability may be more or less according to circumstances. 
Whence it may be further concluded, that the same product or 
products may be in greater demand at a lower scale of price, 
and when attainable by less productive exertion, although nowisa 
increased in utility, merely because accessible to a greater number 
of consumers ; and, on the contrary, less in demand at a higher 
scale of price, because accessible to a smaller number. 

Suppose that, in a severe winter, a method should be hit upon 
of manufacturing knit-waistcoats of woollen at 6/r. apiece ; pro- 
bably all who should have 6 fr. left, after satisfying more urgent 
wants, would provide themselves with these waistcoats : but those 
vrho should have but 5 fr. left must still go without. If the 
same article could be produced at 5/r. these latter also might all 
be provided and become consumers ; and the consumption would 



240 ON DISTRIBUTION. book n. 

be still further extended, if they should be produced at 4/r. only. 
In this manner, products formerly within reach of the rich alone 
have been made accessible to almost every class of society, as 
in the case of stockings. 

When a product is raised in price, whether by taxation or 
otherwise howsoever, the contrary effect is experienced; the num- 
ber of its consumers is reduced ; for it can only be obtained by 
such, as can afford to pay for it ; and the ability to purchase is 
not increased by the same causes, that operate to raise the price. 
Thus in England, the great majority of the population is wholly 
precluded from the consumption of vinous liquors, and of many 
other articles; for their attainment involves so large a sacrifice of 
products, or of productive agency, that those only can attempt it, 
who have a great deal of either to spare. In such cases, not 
only is the number of consumers diminished, but the consumption 
of each consumer is reduced also. Though a consumer of cof- 
fee may not be compelled, by a rise of its price, to relinquish 
that beverage altogether, he must at all events curtail the amount 
of his consumption; which is then like that of two individuals, of 
Vi^hom one discontinue", and the other remains able and willing 
to continue the use of the article. 

In commercial speculation, as the purchaser does not buy for 
his own consumption, he proportions his purchases to what he 
expects to sell. Since, then, the quantity he can sell depends 
upon the price he can afford to sell at, he will buy less according 
as the price rises, and more according as it falls. 

In poor countries, objects of even the commonest use, and of 
inferior price, frequently exceed the means of a great proportion 
of the population. There are countries, where shoes, though 
cheap, are out of reach of most of the inhabitants. — The price 
of this commodity does not fall to a level with the means of 
the people ; because that level is still below the bare cost of pro- 
duction. But, shoes of leather not being absolutely necessary 
to existence, those who are unable to procure these, wear wood- 
en shoes {sabots) or go barefoot. When this is unhappily the 
case with an article of primary necessity, part of the population 
must perish, or at least cease to be renewed. These are the causes 
of a general nature, that limit the demand for each product, and 
for all products in general. 

In respect to supply, it consists of the whole of any commo- 
dity which the owners for the time being are disposed to part 
with for an equivalent, in other words, to sell at the current rate; 
and not merely of what is actually on sale at the time. The 
whole of this is also called the circulating or floating stock. Yet, 
strictly speaking, no commodity is in circulation, except during 
the act of transit from the seller to the purchaser, which is almost 
instantaneous. But the bare act of transit has no influence on 
the terms of the bargain, to which it is commonly subsequent; it 



CHAP. I. ON DISTRIBUTION. 241 

is a mere matter of executive detail. The point of real import- 
ance is, the inclination of the owner to part with the object of 
property. A commodity is in circulation, whenever it is in quest 
of a purchaser, which it may be in the most urgent need of, with- 
out altering its locality in the least. Thus, the stock in a shop 
or warehouse is in circulation; thus too, lands, rent-charges, 
houses, and the like, are said to be in circulation ; and the ex- 
pression is intelligible enough. Even industry is sometimes in 
circulation and sometimes not, according as it is either in quest 
of employment, or already employed. 

For the same reason, an object ceases to be in circulation, the 
moment it is set apart, either for consumption or for export to an- 
other market, or accidentally destroyed, or withdrawn by the ca- 
price of its owner, or held back at a price, which amounts to a 
refusal to sell. 

Inasmuch as supply consists of those commodities only, which 
are to be had at the current price or ordinary rate of the market, 
a commodity raised by the cost of production above that level, 
will cease to be produced, or to form part of the supply. Where- 
fore, the supply will be more abundant, when the current price is 
high, and more scanty when that price has declined. 

Besides these universal and permanent limitations of supply 
and demand, there are others of a casual and transient nature, 
which always operate concurrently with the former. 

The prospect of an abundant vintage will lower the price of all 
the wine on hand, even before a single pipe of the expected vin- 
tage has been brought to market; for the supply is brisker, and the 
sale duller, in consequence of the anticipation. The dealers are 
anxious to dispose of their stock in hand, in fear of the competi- 
tion of the new vintage ; while the consumers, on the other hand, 
retard their fresh purchases, in the expectation of gaining in price 
by the delay. A large arrival and immediate sale of foreign ar- 
ticles all at once, lowers their price, by the relative excess of 
supply above demand. On the contrary, the expectation of a 
bad vintage, or the loss of many cargoes on the voyage, will 
raise prices above the cost of production. 

Moreover, there are some particular products, which nature or 
human institutions have subjected to monopoly, and thus prevent- 
ed from being supplied in equal abundance with those of a simi- 
lar description. Of this kind are the wines of particular and 
celebrated vineyards, the soil of which can not be extended by 
the extended demand. So the postage of letters, is, in most 
countries, charged at a monopoly-price. 

Finally, whatever be the general or particular causes, that 
operate to determine the relative intensity of supply and demand, 
it is that intensity, which is the groundwork of price on every act 
of exchange ; for price, it will be remembered, is merely the cur- 
rent value estimated in money. The demand for all objects of 

39 



242 ON DISTRIBUTION. book ii. 

pleasure, or utility, would be unlimited, did not the difficulty of 
acquirement, or price, limit and circumscribe the supply. On the 
other hand, the supply would be infinite, were it not restricted by 
the same circumstance, the price, or difficulty of acquirement : 
for there can be no doubt, that whatever is producible would then 
be produced in unlimited quantity, so long as it could find pur- 
chasers at any price at all. Demand and supply are the opposite 
extremes of the beam, whence depend the scales of dearness and 
cheapness ; the price is the point of equilibrium, where the mo- 
mentum of the one ceases, and that of the other begins. 

This is the meaning of the assertion, that, at a given time and 
place, the price of a commodity rises in proportion to the increase 
of the demand and the decrease of the supply, and vice versd; or 
in other words, that the rise of price is in direct ratio to the de- 
mand, and inverse ratio to the supply. 

The utility of an object, or, what is the same thing, the desire 
to obtain it, may possibly be unable to raise its price to a level 
with its cost of production. In this case it is not produced, be- 
cause its production would cost more than the product would be 
worth. Probably the price that caviar* would fetch at Paris 
would hardly equal the charge of producing it there ; for it is so 
little in request there, that it scarcely would bring the lowest price 
that it could be procured for, and consequently it is not produced; 
but elsewhere, it is both produced and consumed in great quan- 
tities. 

When the price of any object is legally fixed below the charges 
of its production, the production of it is discontinued, because 
nobody is willing to labour for a loss : those, who before earned 
their livelihood by this branch of production, must die of hunger, 
if they find no other employment ; and those, who could have 
purchased the product at its natural price, are obliged to go with- 
out it. The establishment of the fixed rate, or maximum, is a 
suppression of a portion of production and consumption ; that 
is to say, a diminution of the prosperity of the community, which 
consists in production and consumption. Even the produce al- 
ready existing is not so properly consumed as it should be. For, 
in the first place, the proprietor vvithholds it as much as possible 
from the market. In the next, it passes into the hands, not of 
those who want it most, but of those who have most avidity, cun- 
ning, and dishonesty ; and often with the most flagrant disregard 
of natural equity and humanity. A scarcity of corn occurs; the 
price rises in. consequence ; yet still it is possible, that the labourer, 
by redoubling his exertions, or by an increase of wages, may earn 
wherewithal to buy it at the market price. In the mean time, 
the magistrate fixes corn at half its natural price : what is the 

* A pickle made of the roe of sturgeons, a favourite condiment of Rus- 
sian diet. 



CHAP. I. ON DISTRIBUTION. 243 

consequence? Another consumer, who had already provided 
himself, and consequently would have bought no more corn had 
it remained at its natural price, gets the start of the labourer, 
and now, from mere superfluous precaution, and to take advan- 
tage of the forced cheapness, adds to his own store that portion, 
which should have gone to the labourer. The one has a double 
provision, the other none at all. The sale is no longer regulated 
by the wants and means, but by the superior activity of the pur- 
chasers. It is, therefore, not surprising, that a maximum of price 
on commodities should aggravate their scarcity. 

A law, that simply fixes the price of things at the rate they 
would naturally obtain, is merely nugatory, or serves only to 
alarm producers and consumers, and consequently to derange 
the natural proportion between the production and the demand ; 
which proportion, if left to itself, is invariably established in the 
manner most favourable to both. 

Hope, fear, malevolence, benevolence, in short, every human 
passion or virtue may influence the scale of price. But it is the 
province of moral science to estimate the intensity of their effect 
upon actual price in every instance, which is the only thing we 
are here to attend to. Neither need we advert to the operation 
of the causes of a nature purely political, that may operate to 
raise the price of a product above the degree of its real utility. 
For these are of the same class with actual robbery and spolia- 
tion, which come under the department of criminal jurisprudence, 
although they may intrude themselves into the business of the 
distribution of wealth. The functions of national government, 
which is a class of industry, whose result or product is consumed 
by the governed as fast as it is produced, may be too dearly paid 
for, when they get into the hands of usurpation and tyranny, and 
the people be compelled to contribute a larger sum than is ne- 
cessary for the maintenance of good government. This is a pa- 
rallel case to that of a producer without competitors, whether he 
have got rid of them by force, or by accidental circumstances. 
He may raise his product to what price he will, even to the ex- 
treme limit of the consumer's abihty, if his monopoly be second- 
ed by authority. But it is the province of the statesman, and 
not of the poHtical economist, to teach us how this evil maybe 
avoided. In like manner, although it be the province of ethics, 
or of the knowledge of the moral qualities of man, to teach the 
means of ensuring the good conduct of mankind, in their mutual 
relations, yet, whenever the intervention of a super-human pow- 
er appears necessary to effect this purpose, those who assume 
to be the interpreters of that power must be paid for their service. 
If their labour be useful, its utility is an immaterial product, 
which has a real value; but, if mankind be nowise improved by 
it, their labour, not being productive of utility, that portion of the 



244 ON DISTRIBUTION. book n. 

revenues of society, devoted to their maintenance, is a total loss; 
a sacrifice without any return, (a) 

With the most earnest wish to confine myself within my sub- 
ject, it is impossible to avoid sometimes touching upon the con- 
fines of policy and morality, were it only for the purpose of mark- 
ing out their points of contact. 



CHAPTER II. 

OF THE SOURCES OF REVENUE. 

It has been shown in Book I., that products are raised by the 
productive means at the command of mankind, that is to say, by 
human industry, capital, and natural powers and agents. The 
products thus raised form the revenue of those possessed of these 
means of production, and enable them to procure such of the 
necessaries and comforts of existence, as are not furnished gra- 
tuitously, either by nature, or by their fellow creatures. 

The exclusive right to dispose of revenue is a consequence of 
the exclusive right, or property, in the means of production; and 
such of them, as are not the subject of human appropriation, are 
not either items of productive means, or sources of revenue; 
they form no part of human wealth, which imphes appropriation 
and exclusive possession; for there is no such thing as wealth, 
unless where property is known and established, and where pos- 
session is both acknowledged and secured. 

The origin or the justice of the right of property, it is unne- 



(ffl) A national church is a human institution, whatever a priesthood may 
advance to the contrary. It is but a human means of promoting national 
morality; and its efficacy to that end is the measure of its utility, which 
must at all times determine the propriety of continuing, or remodelling, or 
absolutely discarding it. Hence the absurdity of assigning to such an es- 
tablishment an invariable ratio of the national produce. We learn, that 
the whole surplus revenue of Egypt, in former times, vs^as in the hands of 
the ecclesiastics ; we must by no means conclude, that it was wrongfully 
so; for possibly the business of promoting national morality may have been 
so urgent, as to have required the whole of that surplus. The efficacy of 
the peculiar institution is ahother thing; perhaps the state of human know- 
ledge for the time being may have admitted of no alternative. Hence the 
impolicy, in Catholic countries, of continuing to the priesthood a scale of 
revenue which may have been not too high in the ages of intellectual dark- 
ness. Hence, likewise, the impolicy, in any state, of upholding a national 
ecclesiastical establishment, which the prejudices of the majority reprobate 
so strongly, as to set up a rival institution ; as in Ireland. A double insti- 
tution is thereby maintained, whereof one part is over-salaried by the state, 
without any benefit to national morality; and the other part is underpaid 
by individuals, with much less benefit than is practicable. T. 



CHAP. 11. ON DISTRIBUTION. 245 

cessary to investigate, in the study of the nature, and progress 
of human wealth. Whether the actual owner of the soil, or the 
person from whom he derived its possession, have obtained it by 
prior occupancy, by violence, or by fraud, can make no differ- 
ence whatever in the business of the production and distribution 
of its product or revenue. 

Perhaps it is scarcely necessary to remark, that property in 
that class of productive means, which has been called human in- 
dustry, and in that distinguished by the general name of capital, 
is far more sacred and indisputable, than in the remaining class 
of natural powers and agents. The industrious faculties of man, 
his intelligence, muscular strength, and dexterity, are peculiar to 
himself and inherent in his nature. — And capital, or accumulated 
produce, is the mere result of human frugality and forbearance 
to exercise the faculty of consuming, which, if fully exerted, 
would have destroyed products as fast as they were created, and 
these never could, have been the existing property of any one; 
wherefore, no one else, but he who has practised this self-denial, 
can claim the result of it with any show of justice. Frugality is 
next of kin to the actual creation of products, which confers the 
most unquestionable of all titles to the property in them. 

These several sources of production are some of them aliena- 
ble, as land, implements of arts, &c. ; and some inalienable, as 
personal faculties. Some also are consumable, as are all the 
items of floating (a) capital; others, inconsumable, as land. Some, 
too, there are, that are neither alienable nor consumable, yet are 
capable of destruction; as the human faculties, intellectual and 
corporeal, which vanish with human existence. 

Such as are capable of consumption, as, for instance, the float- 
ing values, whereon production expends its energies, may be 
consumed either in such manner as to occasion a re-production, 
in which case they will still constitute apart of the means of pro- 
duction; or in such manner as to yield no further production, in 
which case they cease to form any part of those means, and are 
devoted to pure destruction, more or less rapid. 

Although revenue, as well as the sources of production, is a 
constituent part of individual wealth, yet no one is reputed to re- 
duce his fortune by the consumption of his revenue only, provid- 
ed that he does not encroach upon his productive means; be- 
cause revenue is a regenerating product, whereas the means of 
production, so long as they continue to exist, are a constant and 
perpetual source of new products. 

The current value of these appropriable sources of production 



(a) Capitaux nobiliaires, which has been rendered floating capital, where- 
in are comprised all products, which the English law terms personal chat- 
tels, and which are sometimes called moveables, although some of these are 
of very slow consumption, as diamonds and precious stones. T. 



246 ON DISTRIBUTION. book ii. 

is established on the same principles, as that of all other objects ; 
that is to say, by the conflicting influence of supply and demand. 
The only remark that need be made upon it is, that the demand 
does not originate in the enjoyment anticipated from the imme- 
diate use of the particular source ; for a field or an implement of 
trade yield to the owner no direct enjoyment, which is capable 
of estimation; their value has reference to the value of the pro- 
duct they are capable of raising, which itself originates in the 
utility of that product, or the satisfaction it may be capable of af- 
fording. 

With regard to those sources, that are inalienable, as are the 
human faculties of mind and body, they can never be the subject 
of actual exchange, and their value is a matter of mere mental 
estimation, grounded upon the value they may be capable of pro- 
ducing. Thus, the productive means of this description, which 
yield to an artisan the wages of 3/n a day, or of 1000/n a year, 
may be reckoned equivalent to a vested capital yielding an equal 
annual revenue, (a) 

And now that we have taken this general and cursory view of 
the sources of production and of revenue in the abstract, we may 
enter upon a more minute analysis of their nature, which will 
lead us into the labyrinth of the science of political economy, and 
furnish us with a clue to some of its most intricate windings. 

The immediate result of these sources is not, strictly speak- 
ing, a product, but a productive service that helps us to a pro- 
duct. Products should, therefore, be considered as the result of 
an interchange of productive service on the one side, and of ac- 
tual products on the other, subsequently to which, revenue ap- 
pears for the first time in the shape of products; and these again 
may be exchanged for other products, into which latter form the 
same revenue will then be converted. 

The conception of this matter will be rendered clearer by a 
practical illustration. A piece of arable land yields an annual 
product, say of 300 setters of wheat, whereof 200 set., more or 
less, may be considered as resulting from the agency of the ca- 
pital and industry employed in its cultivation, and the remaining 
100 set. as resulting from the natural productive powers of the 
land. The revenue, yielded by the land to the proprietor, will 
have appeared first in the way of concurring productive service 
afforded by the object of property, the land ; which productive 
service will have been transferred or lent to the cultivator for the 



(a) They are of that value to the free individual, wherein they are vest- 
ed. But, where human faculties are the subject of appropriation, as in the 
extreme case of negro slavery, or the less flagrant one of feudal vassalage, 
the value of the productive power vested in the appropriated human being 
is to the appropriator an equivalent to the surplus product, which that be- 
ing is capable of affording, and not to the gross product. T. 



CHAP. II. ON DISTRIBUTION. 247 

sum of 100 set. of wheat, and this will be the first act of exchange. 
If these 100 set. of wheat be converted into specie, either by the 
proprietor himself or by the cultivator on his behalf, and in con- 
sequence of a mutual arrangement, this specie will still be the 
same identical revenue, though under the secondary form of 
money. 

This analysis will conduct us to a knowledge of the real value 
of revenue, which falls in with the general definition of value 
given in the preceding chapter, viz : the amount of other objects 
obtainable by exchange for the object of intended transfer. 
What, then, is the object of transfer, for which revenue is given 
in exchange? why, the productive service of those means, that 
the receiver of revenue may be possessed of. And what is ob- 
tained by the primary act of exchange, which we designate pro- 
duction? why, products. Wherefore, the value of revenue is 
large in proportion, not to the value, but to the quantify of the 
product obtained, to the sum total of utility created. 

Thus we find, that the ratio of national revenue, in the aggre- 
gate, is determined by the amount of the product, and not by its 
value.* It is not so with individual revenue ; because a varia- 
tion in the relative value of different products will operate to 
swell that of one individual, or class, at the expense of another. 

Could each member of society live on the primary products 
whereof his revenue is composed, the relative degree of revenue 
would, like that of nations, in the aggregate, depend upon the 
amount of the product, upon the sum of utility created, and not 
upon its exchangeable value. But, in a state of society at all 
elevated above barbarism, this is impossible; each individual 
consumes a much less quantity of his own peculiar product, than 
of those of other people, which he buys with his own. The grand 
point, therefore, of individual importance to the producer is, the 
the quantity of products not of his own creation, which he may 
be able to procure with his own productive means, or with the 
products created by their agency.. Suppose, for instance, the 
land, capital, and personal faculties of a particular individual to 
be engaged in the cultivation of saffron; as he will probably him- 
self consume little or no saffron, his revenue will consist of such 
other objects, as his annual crop of saffron can be exchanged 
for ; and the ratio of that revenue will be elevated by a rise in 
the price of saffron ; while that of the consumers of that article 
will be proportionately reduced to the full extent of the rise of 
its price. On the contrary, their revenue will be augmented in 

* Hence the futility of any attempt to compare the wealth of different 
nations, of France and England for instance, by comparison of the value of 
their respective national products. Indeed, two values are not capable of 
comparison, when placed at a distance from each other. The only fair way 
of comparing the wealth of one nation, with that of another is, by a moral 
estimate of the individual welfare in each respectively. 



248 ON DISTRIBUTION. book n. 

like manner by a fall of its price, to the prejudice of the revenue 
of the grower. 

Every saving in the charges of production, that is to say, every 
saving in the productive agency exerted to raise the same pro- 
duct, is an increase of the revenue of the community to an equal 
extent; as, for example, the contrivance to raise as much upon 
one acre of land as before upon two, or to effect with two days' 
labour, what before required as much as four ; for the productive 
agency thus released may be directed to the increase of produc- 
tion, (a) And this accession of revenue will accrue to the indi- 
vidual benefit of the contriver, so long as the contrivance can be 
confined to his own knowledge ; but to that of consumers at 
large, as soon as the notoriety shall have awakened competition, 
and obliged him to limit his profits to the actual charges of pro- 
duction. 

However revenue may be transformed by the various acts of 
exchange, commencing with the productive agency, which is the 
primitive exhibition of revenue, it remains the same in substance, 
until the moment of its ultimate consumption. The revenue 
yielded by an acre of arable land remains, in reality, the same, 
both after its primary exchange, by the act of production, into 
the form of wheat, and after its secondary transformation into 
silver coin, even although the wheat have been consumed by the 
purchases. But, as soon as the revenued individual converts 
his silver coin into an object of consumption, and that object is 
simply consumed, the value of bis revenue thenceforth ceases to 
exist, and is destroyed and lost, although the silver coin, whose 
form it once assumed, continue in existence. It must not be 
imagined still to exist in the hands of the temporary holder of 
the coin, although lost to the receiver of revenue ; but is equally 
lost to mankind at large; for the actual holder of the coin must 
have obtained possession of it by the transfer of other revenue 



(a) And will be so for the most part, though not entirely, wherever the 
members of the community have no other hope of subsistence, than from 
the product of their own productive means : for the whole surplus of reve- 
nue thus created, is sure to go, in the end, to the appropriators of the na- 
tural sources of production; leaving those, whose productive means are 
merely personal, to employ them upon some other object, or upon an en- 
larged production of the same object. And this is a complete answer to 
the position of Sismondi and Malthus, that economy of human productive 
exertion makes the multiplication of unproductive consumers, not only pro- 
bable, but necessary. But where a poor-law or monastic establishment pro- 
vides for the subsistence of the human agency thus rendered superfluous, 
there will probably be no increase of national revenue consequent upon a 
saving of productive agency ; for the surplus labour is thereby released from 
the necessity of exertion in some other channel. With such institutions, 
the enlargement of productive power by machinery or otherwise may be 
very great, without any enlargement of national production, revenue, or 
wealth. T. 



CHAP. II. ON DISTRIBUTION. 249 

of his own, or of some source of revenue before in his own pos- 
session. 

When revenue is added to capital, it thenceforth ceases to be 
revenue, or, as such, to be capable of satisfying the wants of the 
proprietor ; it can only yield an increased revenue, being an item 
of productive capital, consumable in the manner of capital, that 
is to say, in such way as to yield a product in exchange and re- 
turn for the value consumed. 

When capital or land, or personal service, is let out to hire, its 
productive power is transferred to the renter or adventurer in 
production, in consideration of a given amount of products 
agreed upon beforehand. It is a sort of speculative bargain, 
wherein the renter takes the risk of profit and loss, according as 
the revenue he may realize, or the product obtained by the 
agency transferred, shall exceed or fall short of the rent or hire 
he is to pay. Yet one revenue only can be reahzed; and, though 
a borrowed capital may yield to the adventurer an annual product 
of 10 percent., instead of 5 percent, which he pays in the 
shape of interest, yet the revenue of the capital, the productive 
service it affords, will not be 10 per cent.; for in that gross pro- 
duct is included the recompense of the productive agency, both 
of the capital and of the industry that has turned it to account. 

The actual revenue of each individual is proportionate to the 
quantity of products at his disposal, being either the immediate 
fruit of his productive means, or the result of those transforma- 
tions from its primitive state, which his revenue may have under- 
gone, until it have assumed the shape of the ultimate object of 
his consumption. The ratio of that quantity, or of utility inhe- 
rent in it, can only be estimated from its current price in the 
dealings of mankind. In this sense, the revenue of an individual 
is equal to the value derived from his productive means ; which 
value, however, is the greater, in respect to the objects of his 
consumption, in proportion to the cheapness of those objects, 
which augments his command of other than his own immediate 
products. 

In like manner, the revenue of a nation is the more consider- 
able, in proportion to the intensity of the value whereof it con- 
sists, i. e. of the value of its aggregate productive powers, and 
to its high relative degree to the value of the objects of external 
attainment. The value of productive agency must be high, even 
where that of products is low ; for it should be always recollect- 
ed, that, since the intensity of value depends upon the quantity 
of objects obtainable in exchange, revenue, or, in other words, 
the agency of the national sources of production, is large, in pro- 
portion to the abundance and cheapness of the products derived 
from them. 

40 



250 ON DISTRIBUTION. book ii. 



CHAPTER III. 



OF REAL AND RELATIVE VARIATION OF PRICE. 

The price of an article is the quantity of money it may be 
worth ; current price, the quantity it may be sure of obtaining at 
the particular place. Its locality is material, for the desire of a 
specific object varies in relation to the quantity procurable ac- 
cording to the locality. 

The price obtained upon the sale of an article represents all 
other articles procurable with that price. To say, that the 
price of an ell of broad-cloth is 40/r., implies, that it is exchange- 
able either for so much coined silver, or for so much of any other 
product or products as may be procurable with that sum. Money- 
price is selected for the purposes of an illustration, in preference 
to price in commodities at large, merely for greater simplicity ; 
but the real and ultimate object of exchange is, not money, but 
commodities. 

Price, in this sense, may be divided into buying-price and sell- 
ing-price ; that is to say, the price given to obtain possession of 
an object, and the price obtainable for the relinquishment of its 
possession. 

The price paid for every product, at the time of its original at- 
tainment or creation, is, the charge of the productive agency 
exerted, or the cost of its production.* Tracing upwards to this 
original price of a product, we unavoidably come to other pro- 
ducts ; for the charge of productive agency can only have been 
defrayed by other products. The daily wages of the weaver en- 
gaged in producing broad-cloth are products ; they consist either 
of the articles of his daily subsistence, or of the money wherewith 
he may procure them; both which are equally products. Where- 
fore the production, as well as the subsequent interchange of 
products, may be said to resolve itself into a barter of one pro- 
duct for another, conducted upon a comparison of their respec- 
tive current prices. But there is one important particular, that 
requires the most assiduous attention, the neglect or oversight 
of which has led to abundance of error and misrepresentation, 
and has made the works of many writers calculated only to mis- 
lead the students in this science. 

An ell of broad-cloth, that has, in the production, required the 
purchase of productive agency at the price of 40 /r., will have 
cost that sum in the manufacture ; but if three-fourths only of 

* Vide Wealth of Nations, book i. c. 5. 



CHAP. III. ON DISTRIBUTION. 251 

that productive agency can be made to suffice for its production; 
if, supposing one kind of productive agency only to be requisite, 
15 instead of 20 days' labour of a single workman be enabled to 
complete the product, the same ell of broad-cloth will cost but 
30 /r. to the producer, at the same rate of wages. In this case, 
the current price of human productive agency will have remained 
the same, although the cost of production will have varied in the 
ratio of the difference between 30 fr. and 40 fr. But, as this 
difference in the relation between the cost of production and the 
current price of the product holds out a prospect of larger profit 
than ordinary in this particular channel, it naturally attracts a 
larger proportion of productive agency, the exertion of which, by 
enlarging the supply, reduces again the current price to a level 
with the bare costs of production.* 

This kind of variation in the price of a product I shall call real 
variation of price, because it is a positive variation, involving no 
equivalent variation in the object of exchange, and both may, and 
actually does occur, without any cotemporaneous variation of the 
price, either of productive agency, of the products wherewith it 
is recompensed, or of those, for which the specific object of this 
real variation is procurable. 

It is otherwise with regard to the variation of price of products 
already in existence one to another, without reference to their 
respective cost of production. When the wine of the last vintage, 
that a month before sold at 200 fr. the ton, will fetch no more 
than 150 fr., money and all other objects of desire to the wine- 
vender have actually advanced in price to him; for the productive 
agency exerted in raising the wine, receives a recompense of but 
150 fr., instead of 200 fr. in money, and of commodities in a 
like proportion, which is an abatement of ^ ; whereas, in the in- 
stance above cited, an equal amount of productive agency will re- 
ceive an equal recompense in all other products ; for a degree of 
agency, which has both cost and received 30 fr., will be equally 
well paid with one that has both cost and received 40 fr. 

In the former case, then, of a real variation, the wealth of the 
community will have received an accession; in the latter, o^ rela- 
tive variation, it will have remained stationary ; and for this plain 
reason ; because, in the one case all the purchasers of cloth will 
be so much the richer, without the seller being any poorer; while, 
in the other, the gain of the one class will be exactly equipoised 
by the corresponding loss of the other. In the former case, a 
larger amount of products will be procured with an equal charge 
of production, and without any alteration in the revenues of either 

* The cost of production is what Smith calls the natural price of products, 
as contrasted with their current or market price, as he terms it. But it 
results from what has been said above, that every act of barter or exchange, 
among the rest even that implied in the act of production, is conducted with 
referenee to current price. 



252 ON DISTRIBUTION. book ii. 

buyers or sellers : there will be more actual wealth, more means 
of enjoyment, without any increased expenditure of productive 
means ; the aggregate utility will be augmented ; the quantum of 
produce procurable for the same price will be enlarged ; all 
which are but varied expressions of the same meaning. 

But whence is derived this accession of enjoyment, this larger 
supply of wealth, that nobody pays for? From the increased 
command acquired by human intelligence over the productive 
powers and agents presented gratuitously by nature. A power 
has been rendered available for human purposes, that had before 
been not known, or not directed to any human object ; as in the 
instance of wind, water, and steam-engines: or one before known 
and available is directed with superior skill and effect, as in the 
case of every improvement in mechanism, whereby human or 
animal power is assisted or expanded. The merit of the mer- 
chant, who contrives, by good management, to make the same 
capital suffice for an extended business, is precisely analogous to 
that of the engineer, who simplifies machinery, or renders it more 
productive. 

The discovery of a new mineral, animal, or vegetable, possess- 
ed of the properties of utility in a novel form, or in a greater 
degree of abundance or of perfection, is an acquisition of the same 
kind. The productive means of mankind were amplified, and a 
larger product rendered procurable by an equal degree of human 
exertion, when indigo was substituted for woad, sugar for honey, 
and cochineal for the Tyrian dye. In all these instances of im- 
provement, and those of a similar nature that may be hereafter 
effected, it is observable, that, since the means of production 
placed at the disposal of mankind become in reality more power- 
ful, the product raised always increases in quantity, in proportion 
as it diminishes in value. We shall presently see the conse- 
quences of this circumstance.* 

A fall of price may be general and affect all commodities at 
once ; or it may be partial and affect certain commodities only ; 
as I shall endeavour to explain by example. 

Suppose that, when stockings were made by knitting only, 
thread-stockings, of a given quality, amounted to the price of 

* Within the last hundred years, the impro\-ements of industry, effected 
by the advance of human knowledge, more especially in the department 
of natural science, have vastly abridged the business of production ; but the 
slow progress in moral and political science, and particularly in the branch 
of social organization, has hitherto prevented mankind from reaping the full 
benefit of those improvements. Yet it would be wrong to suppose they 
have reaped none at all. The pressure of taxation has indeed been doubled, 
tripled, or even quadrupled; yet population has increased in most countries 
of Europe ; which is a sign, that a portion at least of the increase of produce 
has fallen to the lot of the subject ; and the population, besides being aug- 
mented, is likewise better lodged, clothed, and conditioned, and I believe 
better fed too, than it was a century ago. 



CHAP. III. ON DISTRIBUTION. 253 

6 fr. the pair. Hence, we should infer, that the rent of the 
land whereon the flax was grown, the profits upon the labour 
and capital of the cultivators, those of the flax-dresser and spin- 
ner, with those likewise of the stocking-knitter, amounted alto- 
gether to the sum of 6 fr. for each pair of stockings. Suppose 
that, in consequence of the invention of the stocking-machine, 6 
fr. will buy two pair of stockings instead of one. As the compe- 
tition has a tendency to bring the price to a level with the cost of 
production, we may infer from this reduced price, that the outlay 
in land, capital, and labour, necessary to produce two pair of 
stockings, is still no more than 6 fr.; thus, with equal means of 
production, the product raised is doubled in quantity. And what 
is a corwincing proof that this fall is positive, is the fact, that 
every person, of what profession soever, may thenceforward ob- 
tain a pair of stockings with half the quantity of his own particu- 
lar product. A capitalist, the holder of five per cent, stock, was 
before obliged to devote the annual interest of 120 /r. to the pur- 
chase of a pair of stockings ; he now gives the interest of 60 fr, 
only. A tradesman selling his sugar at 2/r. per lb. must before 
have sold 3 lb. of sugar to buy a pair of stockings, now he need 
but sell 14 lb.: he therefore sacrifices in the pair of stockings only 
half the means of production he formerly devoted to the acquisi- 
tion of the same object. 

We have hitherto supposed this product alone to have fallen 
in price. Let us suppose two products to fall, stockings and su- 
gar : that, by an improvement of commerce, 1 lb. of sugar cost 
1 fr. instead of 2. In this case, all purchasers of sugar, includ- 
ing the stocking-maker, whose product has likewise fallen, will 
sacrifice, in the purchase of lib. of sugar, but half the productive 
means, which they before allotted for that purpose. 

The truth of this position may be easily ascertained. When 
sugar was at 2 fr. per lb. and stockings at 6 fr. the pair, the 
stocking-maker was obhged to sell one pair of stockings, before 
he could buy 3 lbs. of sugar ; and, as the charges of producing 
this pair of stockings were 6/r., he in reality bought 3 lbs. of su- 
gar at the price of 6/r. value in his own productive means ; in 
like manner as the grocer bought a pair of stockings for 3 lbs. of 
su^ar, that is to say, in his case also, for 6 fr. value of his pecu- 
liar productive means. But when both these commodities have 
fallen to half their price, one pair only, or productive means equi- 
valent to 3 yr., would buy 3 lbs. of sugar ; and 3 lbs. of sugar, pro- 
curable at a charge of production amounting to 3/r., will suffice 
to purchase a pair of stockings. Wherefore, if two kinds of pro- 
ducts, which we have set one against the other, and supposed to 
pass in exchange the one for the other, can both have fallen in 
price at the same time, are we not authorized to infer, that this 
fall is a positive fall, and has no reference or relation to the 
prices of commodities one to another? that commodities in gene- 



254 ON DISTRIBUTION. book ii. 

ral may fall at one and the same time, some more, some less, and 

yet that the diminution of price may be no loss to any body ? 

It is for this reason, that, in modern times, although wages 
stand in nearly the same relation to corn as they did four or five 
hundred years ago, yet the lower classes now enjoy many luxu- 
ries, that were then denied them ; many articles of dress and 
household furniture, for instance, have suffered a real diminution 
of value ; and that the same individuals are more scantily sup- 
plied with others, as with butcher's meat and game,* because 
they have sustained a real increase of value. 

Every saving in the cost of production implies the procure- 
ment, either of an equal product by the exertion of a smaller 
amount of productive agency, or of a larger product by the exer- 
tion of equal agency, which are both the same thing ; and it is 
sure to be followed by an enlargement of the product. It may 
be thought, perhaps, that this increase of production may possi- 
bly take place without any corresponding increase of demand ; 
and, therefore, that the price current of the product may fall be- 
low the cost of its production, even on its reduced scale. But 
this is a groundless apprehension ; for the fall of price tends so 
strongly to expand the sphere of consumption, that, in all the in- 
stances I have been able to meet with, the increase of demand 
has invariably outrun the increasing powers of an improved pro- 
duction, operating upon the same productive means ; so that eve- 
ry enlargement of the power of productive agency has created a 
demand for more of that agency, in the preparation of the product 
cheapened by the improvement. 

Of this a striking example has been afforded by the invention 
of the art of printing. By this expeditious method of multiply- 
ing the copies of a literary work, each copy costs but a twentieth 
part of what was before paid for manuscript ; an equal intensity 
of total demand would, therefore, take off only twenty times the 

*I find in the Recherches of Duprd de Saint Maur, thai; in 1342, an ox 
was sold for from 10 to 11 livres tournois. This sum then contained 7 oz. 
of fine silver, which was worth about 28 oz. of the present day ; and 28 oz. 
of our present money are coined into 171/r. 30 c, which is lower than the 
price of an ordinary ox. A lean ox bought in Poitou for 300/r., and after- 
wards fatted in Lower Normandy, will sell at Paris for from 450 to 500/r. 
Butcher's meat has, therefore, more than doubled in price since the l4th 
century; and probably most other articles of food likewise ; and, if the la- 
bouring- classes had not at the same time been greatly benefited by the pro- 
gress of industry, and put in possession of additional sources of revenue, 
they would be worse fed than in the time of Philip of Valois. 

This may be easily explained. The growing revenues of the industrious 
classes have enabled them to multiply, and consequently to swell the de- 
mand for all objects of food. But their supply can not keep pace with the 
increasing demand, because, although the same surface of soil may be ren- 
dered more productive, it can not be so to an indefinite degree and the sup- 
ply of food by the channel of external commerce, is more expensive than 
by that of internal agriculture, on account of the bulky nature of most of 
the articles of aliment. 



CHAP. III. ON DISTRIBUTION. 255 

number of copies; but probably it is within the mark to say, that 
a hundred times as many are now consumed. So that, where 
there was formerly one copy only of the value of 60 fr. of pre- 
sent money, there are now a hundred copies, the aggregate value 
of which is 300 /r., though that of each single copy be reduced 
to 1-20. Thus the reduction of price, consequent upon a real 
variation, does not occasion even a nominal diminution of wealth.* 

On the other hand, and by the rule of contraries, as a real ad- 
vance of prince must always proceed from a deficiency in the 
product raised by equal productive means, it is attended by a 
diminution in the general stock of wealth ; for the rise of price 
upon each portion does not counterpoise the reduction that 
takes place in the total quantity of the commodity ; to say no- 
thing of the greater relative dearness of the object of consump- 
tion to the consumer, and of his consequent impoverishment in 
comparison. 

Suppose a murrain, or a bad system of management, to cause 
a scarcity of any kind of live stock, of sheep for instance, the 
price will rise, but not in proportion to the reduction of the sup- 
ply ; because in proportion as they grow dearer, the demand 
will decrease. If there were but one fifth of the present num- 
ber of sheep, it is very probable their price would advance to no 
more than double ; so, that in place of five sheep, which might 
together be worth 100/r. at 20 fr. each, there would remain but 
one valued at 40 /r. The diminution of wealth in the article of 
sheep, notwithstanding the increased price, must therefore be 
computed at 60 per cent., which is considerably more than a 
moiety."!" 

Thus, it may be affirmed, that every real reduction of price, 
instead of reducing the nominal value of produce raised, in point 
of fact, augments it ; and that a real increase of price reduces, 
instead of adding to the general wealth ; to say nothing of the 
quantum of human enjoyment, which in the former case is multi- 
plied, and in the latter abridged. Besides, it would be a capital 
error to imagine, that a real fall of price, or in other words, a re- 
duction in the price paid to productive exertion, occasions as 
much loss to the producer as gain to the consumer. A real de- 
preciation of commodities is a benefit to the consumer, without 

* Our data of the products of former times are too few to enable us to de- 
duce from them any precise result ; but those at all acquainted with the sub- 
ject will see, that, whether over or under-stated, will make no difference in 
the reasoning. The statistic researches of the present generation will pro- 
vide future ages with more accurate means of calculation, but will add no- 
thing to the solidity of the principles upon which it must be made. 

t Of this nature is the evil effect of taxation, (especially if it be exorbi- 
tant,) upon the general wealth of the community, independently of its ef- 
fect upon the individual assessed. The cost of production, and consequent- 
ly the real price of Gommodities, is aggravated thereby, and their aggregate 
value diminished. 



256 ON DISTRIBUTION. book ir. 

curtailing the profits of the producer. The stocking-maker, who, 
for 6 fr. manufactures two pair of stockings instead of one, gains 
as much upon that sum as if it were the price of a single pair. 
The landed proprietor receives the same rent, although, by a 
better rotation of crops, the tenant should multiply and cheapen 
the produce of his land. Whenever, without additional fatigue 
to the labourer, means are devised to double the quantity of work 
he can perform, the ratio of his daily gains is not reduced, al- 
though his product is sold at a lower price.* 

This will serve to confirm and explain a maxim, which has 
been hitherto imperfectly understood, and even disputed by many 
writers, and sects of political reasoners ; namely, that a country 
is rich and plentiful, in proportion as the price of commodities is 
low.f 

For argument's sake, I will put the matter in the most favour- 
able light for those who dispute this maxim, and suppose them 
to urge an extreme case ; viz. that, by successive economical 
reductions, the charges of production are at length reduced to 

* I have met with persons, who imagined themselves adding to national 
wealth, by favouring the production of expensive, in preference to that of 
cheaper articles. In their opinion, it is better to make a yard of rich bro- 
cade than one of common sarsenet. They do not consider, that, if the for- 
mer costs four times as much as the latter, it is because it requires the 
exertion of four times as much productive agency, which could be made to 
produce four yards of the latter, as easily as one of the former. The total 
value is the same; but society derives less benefit; for a yard of brocade 
makes fewer dresses than four yards of sarsenet. It is the grand curse of 
luxury, that it ever presents meanness in company with magnificence, (a) 

t Dupont de Nemours {Physiocratie. p. 117.) says, that "it must not be 
supposed, that the cheapness of commodities is advantageous to the lower 
classes ; for the reduction of prices lessens the wages of the labourer, cur- 
tails his comforts, and affords liini less work and lucrative occupation." But 
theory and practice both controvert this position. A fall of wages, occa- 
sioned solely by a fall in the price of commodities, does not diminish the 
comforts of the labourer ; and, inasmuch as the low price of wages enables 
the adventurer to produce at a less expense, it tends powerfully to promote 
the vent and demand for the produce of labour. 

Melon, Forhonnais, and all the partisans of the exclusive system, or ba- 
lance of trade, concur with the economists in this erroneous opinion ; and 
it has been re-affirmed by Sismondi, in his Nouveaux Prin. d'Econ. Pol. liv. 
iv. c. 6. ; where the lower price of products is treated as an advantage gain- 
ed by the consumer upon the producer, in despite of the obvious impossibi- 
lity of any loss to the labouring or other productive classes, by a reduction 
tantamount only to the saving in the cost of production. 



(a) This is by no means universally true. Luxury is a national evil, not 
where it originates in the surplus of individual wealth, and the natural de- 
sire of innocent, though perhaps puerile, gratification ; but where it is ex- 
cited by the profusions of a corrupt court, or the example of pampered fa- 
vourites and overpaid public functionaries. Where things are left to them- 
eslves, it is certain that brocade will never be produced for home consxmip- 
tion, until the demand for articles of more general utility has been fully 
satisfied. T. 



CHAP. III. ON DISTRIBUTION. 257 

nothing; in which case, it is evident, there can no longer be rent 
for land, interest upon capital, or wages on labour, and, conse- 
quently, no longer any revenue to the productive classes. What 
then ? Why then, I say, these classes would no longer exist. 
Every object of human want would stand in the same predicament 
as the air or the water, which are consumed without the necessity 
of being either produced or purchased. In like manner as every 
one is rich enough to provide himself with air, so would he be to 
provide himself with every other imaginable product. This would 
be the very acme of wealth. Political economy would no longer 
be a science ; we should have no occasion to learn the mode of 
acquiring wealth ; for we should find it ready made to our hands. 

Although there be no instance of a product falling to nothing 
in price, and becoming worth no more than mere water, yet some 
kinds have undergone prodigious abatements ; as fuel in those 
places where coal pits have been discovered ; and such abate- 
ments are so many approximations to that imaginary state of 
complete abundance, I have just been speaking of. 

If different commodities have fallen in different ratios, some 
more, others less, it is plain they must have varied in relative 
value to each other. That which has fallen, stockings, for in- 
stance, has changed its value relatively to that which has not 
fallen, as butcher's meat ; and such as have fallen in equal pro- 
portion, like stockings and sugar in our hypothesis, have varied 
in real, though not in relative value. 

There is this difference between a real and a relative varia- 
tion of price ; that the former is a change of value, arising from 
an alteration of the charges of production ; the latter, a change, 
arising from an alteration of the ratio of value of one particular 
commodity to other commodities. Real variations are beneficial 
to buyers, without injury to sellers; and vice versa; but in relative 
ones, what is gained by the seller is lost by the purchaser, and vice 
versa. A dealer, having in his warehouse 100,000 lbs. of wool 
at ifr. per lb., is worth 1 00,000 /r.; if, by reason of an extraor- 
dinary demand, wool should rise to 2 fr. per lb., that portion of 
his capital will be doubled, but all goods brought to be exchanged 
for wool will lose as much in relative value as the wool will gain. 
A person in want of 100 lbs. of wool, who could before have ob- 
tained it by disposing, say of 4 sellers of wheat valued at 100 /r., 
must now dispose of twice that quantity. He will lose the 100 /r. 
gained by the wool- dealer ; and the nation be neither enriched 
nor impoverished.* 

*The Earl of Lauderdale published in 1807, a work, entitled, '■'■Researches 
on the Nature and Origin of public Wealth, and on the Causes which concur 
in its Increase ;" the whole reasoning of which is built on this erroneous 
proposition, that the scarcity of a commodity, though it diminish the wealth 
of society in the aggregate, augments that of individuals, by increasing 
the value of that commodity in the hands of its possessors. Whence the 

41 



258 ON DISTRIBUTION. book ii. 

When sales of this kind take place between one nation and an- 
other, the nation, that sells the commodity, which has advanced 
in relative price, gains to the amount of the advance, and the pur- 
chasing nation loses precisely to the same extent. Such a rise 
of price adds nothing to the general stock of wealth, existing in 
the world, which can only be enlarged by the production of some 
new utility, that may become the object of price or estimation ; 
whereas, in other cases, one always loses what another gains : 
and so it is with all kinds of jobbing transactions, founded upon 
the fluctuation of prices one upon another. 

In all probabihty, the time is not very distant, when the Euro- 
pean states, awake at length to their real interest, will renounce 
the costly rights of colonial dominion, and aim at the independent 
colonization of those tropical regions nearest to Europe ; as of 
some parts of Africa. The vast cultivation of what are called 
colonial products, that would ensue, could not fail to supply Eu- 
rope in the greatest abundance, and probably at most moderate 
prices. Such merchants as shall then have stock on hand, pur- 
chased at the old prices, certainly will make a loss upon that 
stock ; but their loss will be a clear gain to the consumer, who 
will for a time enjoy this kind of produce, at a price inferior to 
the charge of production ; the merchants will gradually replace 
their dear-bought produce, by other of equal quality, raised with 
superior intelligence ; and the consumer will then reap the ad- 
author deduces the unsound conclusion, that national, difFei-s in principle 
from individual wealth. He has not perceived, that, whenever a purchaser 
is obliged to make the acquisition by the sacrifice of a greater value, he 
loses just as much as the seller gains ; and that every operation, designed to 
procure this kind of benefit, must occasion to one party a loss, equivalent 
to the gain of another. 

He likewise refers this imaginary difference between the principle of 
public and of private wealth to this circumstance ; that the accumulation of 
capital, which is an advantage to individual, is detrimental to national 
wealth, by obstructing the consumption, which is the stimulus of industry. 
He has fallen into the very common error of supposing, that capital is, by 
accumulation, withdrawn from consumption; whereas, on the contrary, it is 
consumed, but in a reproductive way, and so as to afford the means of a per- 
petual recurrence of purchase, which can occur but once in the case of un- 
productive consumption. Vide Book III. infra. Thus it is, that a single 
error in principle, vitiates a whole work. The one in question is built upon 
this unsound foundation ; and, therefore, serves only to multiply, instead of 
reducing the intricacies of the subject, (a) 



(a) The error of Lauderdale is analogous to that o? Sismondi and of Mal- 
thus ; and arises from the notion, that an extension of productive power 
makes an extension of unproductive consumption necessary; whereas, it is 
thereby rendered possible, or at the utmost probable only. The state, as 
well as its subjects, may consume in a way conducive to the further exten- 
sion of productive power ; and the state, like an individual, is powerful and 
wealthy, in proportion to the extent of the productive sources in its posses- 
sion, and to the fertility of those sources. T. 



CHAP. III. ON DISTRIBUTION. 259 

vantage of superior cheapness and multiplied enjoyment, with no 
loss to any body ; for the merchant will both buy and sell cheap- 
er ; and human industry will have made a rapid stride, and open- 
ed a new road to affluence and abundance.* 



CHAPTER IV. 

OF NOMINAL VARIATION OF PRICE, AND OF THE PECULIAR VALUE 
OF BULLION AND OF COIN. 

In treating of the elevation and depression of the price of com- 
modities, although value has been expressed in money, no no- 
tice has been taken of the value of money itself; which, to say 
the truth, plays no part in real, or even in relative variation of 
the price of other commodities. One product is always ultimate- 
ly bought with another, even when paid for in the first instance 
in money. When the price of wool is doubled, it is purchased 
with twice the quantity of every other commodity, whether the 
exchange be made directly, or through the intermediate agency of 
money. The baker, who could have bought 1 lb. of wool with 
6 lbs. of bread, or, with its price in money, say I fr., will be 
obliged to sacrifice 12 lbs. of bread to obtain the 2/r. necessary 
to purchase 1 lb. of wool at its advanced price. But, if it be pro- 
posed to compare to logellier the relative value, not of stockings, 
meat, sugar, wool, bread, &c., but of any one of those articles 
with that of money itself, we shall find, that money, like all other 
commodities, may undergo, and often has, in fact, undergone a 
real variation; that is to say, a variation in the charges of its 
production ; and a relative one, that is to say, a change of value, 
in comparison with other products. 

Since the discovery of the American mines, silver, having fall- 
en to about a fourth of its former value, has lost three-fourths of 
its relative value to all other products, whose price has, mean- 
while, remained stationary; as to that of corn, for instance; con- 
sequently, one must give 4 oz. of silver for 1 setier of wheat, 
which, in the year 1500, was to be had for 1 oz. or thereabout. 
A commodity, which, since that period, may have fallen to half 
its price, while silver was faUing to one-quarter, will, therefore, 

* The vast means at the disposal of Napoleon might have been success- 
ftilly directed to this grand object, and then he would have left the reputa- 
tion of having- contributed tc civilize, enrich, and people the world ; and not 
of having been its scourge and devastator. When the Barbary shore shall 
be Hned with peaceful, industrious, and polished inhabitants, the Mediter- 
ranean will be an immense lake, furrowed by the commerce of the wealthy 
nations, peopling its shores on every side. 



260 ON DISTRIBUTION. book ii. 

have doubled its relative value to silver, for this commodity then 
cost 1 oz., and would now be worth 4 oz. of silver, had it not 
fallen itself in value; but having itself lost one-half its value, it 
is sold for but 2 oz. ; that is to say, for twice as much silver as 
at the former period. 

Such is the effect of real and of relative variation in the price 
of silver. But, independently of these variations, there have 
been vast alterations in the denomination given, at different pe- 
riods during the interim, to the same quantity of pure metal, 
which should make us place very little reliance on the accuracy 
of our estimate of real and relative variation. 

In 1514, an ounce of silver would purchase 1 setier of wheat, 
which is now worth 4 oz. ; this was a relaitive variation of silver 
to wheat. This quantity of silver then was denominated 30 
soMs;* and, had the same quantity of silver still preserved the 
same denomination, 4 oz. would now be called 120s. or 6/r. 
Thus, wheat at 6fj\ the setier would have risen in relation to 
silver, or silver have fallen in comparison with wheat. There 
would, however, have been no nominal variation. But 4 oz. of 
silver are now denominated 24 fr. instead of 6/r. ; so that there 
has been a nominal, as well as a relative variation, — a mere ver- 
bal alteration. The real and relative variation has been in the 
ratio of 4 to 1 ; but the nominal value of money has declined in 
the ratio of 16 to 1 since 1514. 

It is obvious, therefore, that one can not form an idea of the 
value of a commodity from its estimate of money price, except 
during a space of time, and within n space of territory, in which 
neither the denomination of the coin, nor the value of its mate- 
rial, has undergone any change ; else the valuation will be mere- 
ly nominal, and convey no fixed idea of value whatever. To say 
that the setier of wheat sold for 30 sous in 1514, without explain- 
ing the then value of 30 sous, is giving us a price, that conveys 
either no idea at all, or a fallacious one if it be meant to affirm, 
that the setier of wheat was then worth 30 sous of present money. 
In comparing values, the denomination of coin is useful only in- 
asmuch as it designates the quantity of pure metal contained in 
the sum specified. It may serve to denote the quantity of the 
metal ; but can never serve as an index of value at any distance 
of time, or of place. 

It is scarcely necessary to point out the effects of an alteration 
in the quantity of metal, to which a fixed denomination is given, 
upon national and individual property. Such an expedient can 
neither increase nor diminish the real, or even the relative value, 
either of the metal or of any other commodity. If 1 oz. of sil- 
ver be struck into two crowns instead of one, two crowns will be 

* Traite Historique, Leblanc; and, Essai sur les Monnaies, by Dupre de 
Saint Maur. 



CHAP. IV. ON DISTRIBUTION. 261 

paid wherever one was given before ; that is to say, 1 oz. of sil- 
ver will be given in either case: so that the value of silver will 
not have varied. But when a sale has been made on credit for 
a given time, and payment stipulated in crowns, the seller may 
be liable to receive ^ oz. in each crown, instead of 1 oz. accord- 
ing to the intention of the contracting parties. This transfer of 
the old denomination to a different portion of metal will, there- 
fore, unjustly benefit the one party, to the injury of the other. 
For every profit to one individual is a loss to another, unless it 
arise from actual production, or from greater economy in the 
charges of production, which is equivalent to actual production. 

With regard to the peculiar and inherent value of bullion or of 
money, it originates, like that of all other commodities, in the 
uses to which it is applicable, as we have before observed. The 
degree of that value is greater or less, according as its use is 
more or less extensive, its employment more or less necessary, 
and its supply more or less abundant. 

Gold and silver, though the most common materials of money, 
can not act as such while in an uncoined state ; they are then 
not money, but the raw material of money. In the present con- 
dition of society, every individual can not turn bullion into coin 
at his pleasure; and, therefore, coin may be of considerably high- 
er value than bullion of the same standard of weight and quality, 
if the demand for coin be more urgent than the demand for bul- 
lion. But bullion can never be perceptibly higher in value than 
coin of equal weight and quality; because the latter may be rea- 
dily converted into the former. The reason why coin so seldom 
much exceeds bullion in value is, that the avidity of governments, 
which are monopohsts of the business of coinage, to profit by the 
diflTerence between coin and bullion, has led them into the error 
of over-stocking the market with their manufacture of coin. Thus 
it is, that coin is never depressed in value below, and rarely much 
elevated above bullion. Wherefore, the detail of the circum-^ 
stances, that have hitherto been, or may hereafter be, the occa- 
sion of variations in the intrinsic value of gold or silver bullion, 
will serve at the same time to explain the variations of their va- 
lue in the pecuHar character of money. 

It has already been noticed,* that the ten-fold supply of those 
metals, poured into the market in consequence of the discovery 
of America, did not effect a corresponding reduction of their va- 
lue to -^-^ of what it had before been. For the demand for them 
was at the same period greatly enlarged by the contemporaneous 
increase of commerce, manufacture, and luxury. All the lead- 
ing states of Europe had before been wholly destitute of indus- 
try: the circulation of products, whether as capital or for mere 
consumption, was very trifling in amount. Industry and produc- 

* Suprd, book I. chap. 21. seet. 7. 



262 ON DISTRIBUTION. book ii. 

tive energy made a sudden and simultaneous effort «U over Eu- 
rope; and the commodity employed as the material of money, 
the agent of exchange, could not but become more in demand, 
upon the greater extent and frequency of mutual dealings. About 
the same time, the new route to the Eastern ocean, by rounding 
the Cape of Good Hope, was discovered, and drew abundance 
of adventurers into that direction; the products of the East ob- 
tained a more general consumption; but Europe, having no other 
products of her own to offer in exchange, was compelled to give 
the precious metals, of which India absorbed an immense quan- 
tity. Nevertheless, the multiplication of products tended to the 
increase and diffusion of wealth; mere higlers grew up into opu- 
lent merchants, and the fishing towns of Holland already reckon- 
ed amongst their citizens individuals worth a million of /rancs. 
The costly objects, that none but princes could before aspire to 
possess, becam_e attainable by the commercial classes ; and the 
increasing taste for plate and expensive furniture created a great- 
er demand for gold and silver to be employed on those objects. 
Beyond all question, the value of those metals would have pro- 
digiously advanced, had not the mines of America been then op- 
portunely discovered. 

Their discovery completely turned the scales. The rapid in- 
crease of the use and demand for gold and silver was far more 
than counterbalanced by the increasing supply, which completely 
glutted the market. Hence the great reduction of their value, 
which has been before observed upon, and which would have 
been far greater still, but for the concurrence of the circumstances 
just stated, whereby the value of silver, or its price in commodi- 
ties at large, was checked in its fall, and limited to one-fourth, 
instead of being depressed in equal ratio with the increased sup- 
ply, that is to say, to one-tenth. 

This counteracting force must have escaped the penetration 
of Locke, or he would not have said, that the ten-fold increase 
of silver, since the year 1500, necessarily raised the price of 
commodities in a ten-fold degree. The few instances he might 
have cited in support of his position, were by no means sufficient 
to establish its accuracy; for a far greater number and variety of 
products might be mentioned, for which, as well as for silver, 
the demand compared with the supply had increased in the ratio 
of 2^ to 1, between 1500 and the date of the work of Locke in 
question.* But, although this may be true of some particular 

* The increased intensity of the demand for silver compared with its 
supply, consequent upon the discovery of America, is stated at 2 1-2 to 1, 
because, but for this increase of demand, the ten-fold supply would have re- 
duced its value to one-tenth of what it had been previously to that event, 
and given to 100 oz. the value of 10 oz. only. But 100 oz. were only redu- 
ced to one-fourth of their former value, i. e. to the value of 25 oz. ; which 
bears to 10 oz. the ratio of 2 1-2 to 1. This could not have been the case, 
unless the demand for silver, compared with the supply, had advanced in 



CHAP. IV. ON DISTRIBUTION. 263 

products, it may not be so of abundance of others, for some of 
which the demand has not advanced at all since 1500, while the 
supply of others has kept pace with the progressive demand, and 
consequently the ratio of their value remained stationary, with the 
exception of trifling temporary variations arising from causes of 
a nature wholly distinct; which, by the way, should teach us the 
necessity, in this science, of submitting insulated facts to the 
test of reasoning; for fact will not subvert theory, unless the 
whole of the facts applicable be taken into consideration, as well 
as the whole of the circumstances, that may vary the nature of 
those facts; which is hardly possible in any case. 

The writers of the Encyclopedie have fallen into the same er- 
ror, in stating,* that a household establishment, wherein the sil- 
ver plate should not have varied in quantity or quality from the 
middle of the sixteenth century to the present time, would be but 
one-tenth as rich in plate now as at the former period. Whereas, 
its comparative wealth would be reduced to one-fourth only ; 
since, although the increase of supply has depressed that value 
to Jp°Q-, the increase of demand, on the other hand, has raised it 

to V^/^.t 

It is deserving of attention, that the major part of the coin is 
in constant circulation, in the appropriate sense of the word, as 
defined above. Inthis respect it differs from most other commo- 
dities; for they are in circulation only so long as they are in the 
hands of the dealers, and retire from it as soon as transferred to 
the consumer. Money, even when employed as capital, is never 
desired as an object of consumption, but merely as one of bar- 
ter; every act of purchase is an offer of money in barter, and a 
furtherance of its circulation. The only part withdrawn from 
circulation is what may be hoarded or concealed, which is al- 
ways done with a view to its re-appearance. 

Gold or silver, in the shape of plate, embroidery, or jewellery, 

that proportion. But the supply having increased ten-fold in the same in- 
terval, if we would find the ratio of the actual increase of the demand for 
silver, whether for the purposes of circulation, of luxury, or of manufac- 
ture, since the first discovery of the American mines, we must multiply 
2 1-2 by 10, which will give 25. And probably this estimate will not ex- 
ceed the truth, although 25 times may seem a prodigious advance. How- 
ever, it would doubtless have been infinitely less considerable, but for the 
influx of supply from America ; for the excessive dearness of silver would 
have greatly curtailed the use of it. Silver plate would probably be as rare 
as gold plate is now ; and silver coin would be less abundant, because it 
would go further, and be of higher value. 

* Art. Monnaies. 

t If we are to believe Ricardo, the increase of demand has no effect upon 
value which is determined solely by the cost of production. He seems not 
to have perceived, that it is demand that makes productive agency an ob- 
ject of appreciation. A diminution of the demand for silver bullion would 
throw all those mines out of work, of which the lower scale of price was not 
adequate to the charges of bringing the product to market. 



264 ON DISTRIBUTION. book ii. 

is in circulation only while in quest of, or in readiness for a pur- 
chaser; which it ceases to be, when it reaches the possession of 
the consumer. 

The general use of silver amongst all the civilized nations of 
the world, coupled with its great facility of transport, makes it a 
commodity of such extensive demand, that none but a very large 
influx of fresh supply can sensibly affect its value. Thus, when 
Xenophon, in his essay on the revenues of Athens, urges his 
countrymen to give more assiduous attention to the working of 
the mines of Attica, by the suggestion, that silver does not, like 
other commodities, decline in value with the increase in quantity, 
he must be understood to say, that it does not perceptibly de- 
cline. Indeed, the mines of Attica were too inconsiderable in 
their product, to influence the value of the stock of that metal 
then existing in the numerous and flourishing states upon the 
borders of the Mediterranean Sea, and in Persia and India; be- 
tween all which and Greece the commercial intercourse was suf- 
ficiently active, to keep the value of silver stationary in the Gre- 
cian market. The driblet of silver, furnished by Attican metal- 
lurgy, was a mere rivulet trickling into an ocean of existing sup- 
ply. It was impossible for Xenophon to foresee the influx of 
the American torrent, or to guess at the consequences of its ir- 
ruption. 

If silver were, like corn and other fruits of the earth, an object 
of human food and sustenance, the enlargement of the sources 
of its supply would not have lowered its value; for the strong 
impulse of the human race, towards the multipHcation of their 
species to a level with the means of subsistence, would have 
made the demand keep pace with the increase of supply. The 
tenfold multiplication of corn would be followed by a tenfold in- 
crease of the demand for it; inasmuch as it would engender new 
mouths to consume it; and corn would maintain nearly the same 
average of relative value to other commodities. 

This will explain, why the variations of the value of silver are 
both slow in operation, and considerable in amount. Their slow- 
ness is owing to the universality of the demand, which prevents 
a moderate variation of supply from being sensibly felt; and their 
magnitude to the limited uses of the metal, which prevent the in- 
crease of demand from keeping pace with a rapid increase of 
supply. 

Silver has utility for the purposes of plate, furniture, and orna- 
ment, as well as for those of money; and is the more copiously 
employed on those objects, in proportion to the degree of nation- 
al wealth. Its use in the peculiar character of money is propor- 
tionate to the quantity of moveable and immoveable objects of 
property, that there may be to be circulated ; wherefore, coin 
would be more abundantly required in rich than in poorer na- 



CHAP. IV. ON DISTRIBUTION. 265 

tions, were not the following circumstances to control this ge- 
neral rule. 

1. The superior rapidity of circulation, both of money and 
commodities, in a state of national opulence, which makes a 
smaller quantity of money requisite, in proportion to the total of 
commercial dealings. The same sum in a rich country will 
effect perhaps ten successive operations of exchange in the same 
space of time, as one in a poor country.* Wherefore, the mul- 
tiplication of commodities to be circulated is not necessarily at- 
tended with aco-extensive increase of the demand for money. The 
business of circulation is extended ; but the agent of circulation 
becomes more active and efficient. 

2. In a state of national opulence, credit is a more frequent 
substitute for money. In Chap. 22, of the preceding book, it 
has been shown, how a portion of the national money may be 
dispensed with by the employment of convertible paper, without 
any resulting inconvenience.! By this expedient, the use of me- 
tal money, and, consequently, the demand for silver for the pur- 
poses of money, is considerably diminished. Nor is convertible 
paper the sole expedient of substitution amongst an industrious 
and commercial people; every kind of private obligations and 
covenants, as well as sales on credit, transfers of money-credit, 
and even mere debtor and creditor accounts current, have an ef- 
fect precisely analagous. 

Thus the necessity, and consequently the demand, for metal 
money never advances in equal ratio with the progressive mul- 
tiplication of other products; and it may be truly said, that the 
richer a nation is, the smaller is the amount of its coin, in com- 
parison with other nations. 

Were the quantum of the supply alone to determine the ex- 
changeable value of a commodity, silver would stand to gold in 
the ratio of 1 to 45; for silver and gold are produced by metal- 
lurgy as 45 to l.J But the demand for silver is greater than for 
gold ; its uses are both far more general and far more various; 

* In a poor country, after a dealer has disposed of his wares, he is some- 
times a long while before he can provide himself with the returns he has in 
view; and, during the interval, the money-proceeds remain idle in his 
hands. Moreover, in a poor country, the investment of money is always 
difficult. Savings are slow and gradual, and are seldom turned to profita- 
ble account, until after a lapse of many years ; so that a great deal of mo- 
ney is always lying by in a state of inaction. 

+ Ricardo, whom I look upon as the individual in Europe the best ac 
quainted with the subject of money, both in theory and in practice, has 
shown, in his Proposal for an economical and secure Currency, that, when, 
the good government of the state may be safety reckoned upon, paper may 
be substituted for the vs^hole of a metallic money ; and a material possessed 
of no intrinsic value, by skilful management, be made to supplant a dear 
and cumbrous one, whose metallic properties are never called into play by 
the functions of money. 

t Humboldt. Essai Pol. sur la Nouvelle Espagne, 8vo. torn. iv. p. 222. 

42 



266 ON DISTRIBUTION. book u. 

and thus its relative value is prevented from falling lower than 1 
to 15. 

A portion of the demand for the precious metals is occasioned 
by their gradual destruction by use; for, although less subject to 
decay than most products, they are still perishable in a certain 
degree; and doubtless the wear, though slow, must be consider- 
able upon the immense quantity of gold and silver in constant 
use, as well in the character of money, as in the various objects 
of spoons, forks, goblets, dishes, and jewellery of all sorts. 
There is likewise a large consumption in plating and gilding. 
Smith asserts, that the manufactures of Birmingham alone, in 
his time, worked up annually, as much as the worth of 50,000/. 
in these ways.* A further allowance must be made for the con- 
sumption of embroidery, tissue, book-binding, &c., all which 
may be set down as finally lost to other purposes. Add to this 
the buried hoards, the knowledge of which dies with the posses- 
sor, and the quantity lost by shipwreck. 

If the nations of the world go on increasing their wealth, as 
most of them certainly have done for the last three centuries, 
their want of the precious metals will progressively advance, as 
well in consequence of the greidual wear, which will be greater in 
proportion to their increasing use, as of the multiplication and 
increased aggregate value of other commodities, which will create 
a larger demand for the purposes of transfer and circulation. If 
the produce of the mines do not keep pace with the increasing 
demand, the precious metals will rise in value, and less of them 
be given in exchange for other products in general. If the pro- 
gress of mining shall keep pace with the advances of human in- 
dustry, their value will remain stationary, as it seems to have 
done for the last two centuries; during which the demand and 
supply have regularly advanced together-l And, if the supply 
of those metals outrun the progress of general wealth, as it seems 

* Wealth of Nations, book i. c. 11. The manufacturing consumption of 
Birmingham and other towns has greatly increased since the date of that 
work. 

t We are assured by Humboldt, that the produce of the mines of Mexico 
has, in the last 100 years, been increased in the ratio of 110 to 25; also, 
that such is the abundance of silver ore, in the chain of the Andes, that, 
reckoning the number of veins either worked superficially, or not worked at 
all, one would be led to imagine, that Europe has hitherto had a mere sam- 
ple of their incalculable stores. Essai Pol. sur la N. Espagne, 8vo. torn. iv. 
p. 149. 

The very slight and gradual depreciation of gold and silver, effected by 
their immense and increasing annual supply, is one amongst many proofs 
of the rapid and general advance of human wealth, Vv'hereby the demand is 
made to keep pace with the supply. Yet I am inclined to think, that their 
value, after remaining nearly stationary for a century, has, within the last 
thirty years, begun again to decline. The setier of wheat, Paris measure, 
which was for a long time, on an average sold for 4 oz. of silver, has now 
risein to 4 1-2 oz., and rents are raised upon every renewal of lease. AH 



CHAP. IV. ON DISTRIBUTION. • 267 

to be doing at this moment, they will fall in respect to other com- 
modities at large. Metal-money will thereby be rendered more 
cumbrous; but the other uses of gold and silver will be more 
widely diffused. - 

It would be a long and tedious task to expose all the false rea- 
soning and erroneous views, originating in the perpetual confu- 
sion of the different kinds of variation, that it has cost so much 
time to analyze and distinguish. It is enough to put the reader 
in a condition himself to discover their fallacy, and estimate the 
tendency of measures Slvowedly directed to influence public 
wealth, by operating upon the scale of value. 



CHAPTER Y. 

OF THE MANNER IN WHICH REVENUE IS DISTRIBUTED AMONGST 

SOCIETY. 

The causes, which determine the value of things, and which 
operate in the way described in the preceding chapters, apply 
without exception to all things possessed of value, however pe- 
rishable; amongst others, therefore, to the productive service 
yielded by industry, capital, and land, in a state of productive 
activity. Those, who have had at their disposal any one of these 
three sources of production, are the venders of what we shall 
here denominate productive agency; and the consumers of its 
product are the purchasers. Its relative value, like that of every 
other commodity, rises in direct ratio to the demand, and inverse 
ratio to the supply. 

The wholesale employers of industry, or adventurers, as they 
have been called, are but a kind of brokers between the venders 
and the purchasers, who engage a quantum of productive agency 
upon a particular product, proportionate to the demand for that 

other things seem to be rising in the like proportion; which indicates, that 
silver is undergoing a depreciation of relative value. (1) 

(1) [It is here very justly remarked by the translator " that this may have 
been true about the period of the first treaty of Paris in 1814. Since then 
a variety of circumstances, he observes, have occurred to turn the scale of 
variation to the opposite direction." Some of the circumstances enumerat- 
ed by him undoubtedly have had that effect ; such, for example, as the di- 
minished productiveness of the mines of Mexico and Peru, caused by the 
civil wars in those countries, and the increased demand for the precious 
metals, arising from the simultaneous return, on the part of Great Britain, 
the United States, Russia, and other nations to a metallic medium, or to a 
paper currency convertible at pleasure into coin.] American Editor. 



268 ON DISTRIBUTION. book n. 

product.* The farmer, the manufacturer, the merchant, is con- 
stantly occupied in comparing the price, which the consumer of 
a given product will and can give for it, with the necessary 
charges of its production; if that comparison determine him to 
produce it, he is the organ of a demand for all the productive 
agency apphcable to this object, and thus furnishes one of the 
bases of the value of that agency. 

On the other hand, the agents of production, animate and in- 
animate, land, capital, and human labour, are supplied in larger 
or smaller quantity, according to the action of the various mo- 
tives, that will be detailed in the succeeding chapters; thus form- 
ing the other basis of the value at which their agency is rated. f 

Every product, when completed, repays by its value the whole 
amount of productive agency employed in its completion. A 
great part of this agency has been paid for before the entire com- 
pletion of the product, and must have been advanced by somebo- 
dy: other part has been remunerated on its completion; but the 
whole is always paid for ultimately out of the value of the pro- 
duct. 

By way of exemplifying the mode, in which the value of a pro- 
duct is destributed amongst all that have concurred in its pro- 
duction, let us take a watch, and trace from the commencement, 
the manner in which its smallest parts have been procured, and 
in which their value has been paid to every one of the infinite 
number of concurring producers. 

In the first place we find, that the gold, copper, and steel, 
used in its construction, have been purchased of the miner, who 
has received in exchange for these products, the wages of labour, 
interest of capital, and rent paid to the landed proprietor. 

The dealers in metal, who buy of the original producer, re-sell 
to those engaged in watch-making, and are thus reimbursed their 
advance, and paid the profits of their business into the bargain. 

The respective mechanics, who fashion the different parts 
whereof a watch is composed, sell them to the watchmaker, who, 
in paying them, refunds the advance of their previous value, to- 
gether with the interest upon that advance; and pays, besides, 

* It has been already seen, that the demand for every product is great, 
in proportion to the degree of its utility, and to the quantity of other pro- 
ducts possessed by others, and capable of being given in exchange. In other 
words, the utility of an object, a-nd the wealth of the purchasers, jointly 
determine the extent of the demand. 

t In digesting the plan of this work, I hesitated for a long time, whether 
or no to place the analysis of value before that of production ; to explain the 
nature of the quality produced, before entering upon the investigation of the 
mode of its production. But it appeared to me, that to make the founda- 
tion of value intelligible, it was necessary to have a previous knowledge of 
wherein the costs of production consist ; and for that purpose, to have a 
just and enlarged conception of the agents of production, and of the service 
they are capable of yielding. 



CHAP. V. ON DISTRIBUTION. 269 

the wages of labour hitherto incurred. This very complex ope- 
ration of payment may be effected by a single sum, equal to the 
aggregate of those united values. In the same way, the watch- 
maker deals with the mechanics that furnish the dial plate, the 
glass, &c., and such ornaments as he may think fit to add, — 
diamonds, enamel, or any thing he pleases. 

Last of all, the individual purchaser of the watch for his own 
use refunds to the watchmaker the whole of his advances, toge- 
ther with interest on each part respectively, and pays him be- 
•sides, a profit upon his personal skill a-^d industry. 

We find, then, that the total value of the watch has been 
shared amongst all its producers, perhaps long before it was 
finished ; and those producers are much more numerous than I 
have described, or than is generally imagined. Among them, 
probably, may be found the unconscious purchaser himself, who 
has bought the watch, and wears it in his fob. For who knows 
but he may have advanced his own capital to a mining adventur 
er, or a dealer in metal ; or to the director of a large factory ; or 
to an individual who acts himself in none of these capacities, but 
has underlent to one or more such persons a part of the funds 
he has borrowed at interest from the identical consumer of the 
watch 1 

It has been observed, that it is by no means necessary for a 
product to be perfected for use, before the majority of its concur- 
ring producers can have been reimbursed that portion of value 
they have contributed to its completion ; in a great many cases, 
these producers have even consumed their equivalent long before 
the product has arrived at perfection. — Each successive produc- 
er makes the advance to his precursor of the then value of the 
product, including the labour already expended upon it. His suc- 
cessor in the order of production, reimburses him in turn, with 
the addition of such value as the product may have received in 
passing through his hands. Finally, the last producer, who is 
generally the retail dealer, is compensated by the consumer for 
the aggregate of all these advances, plus the concluding operation 
performed by himself upon the product. 

The whole revenues of the community are distributed in one 
and the same manner. 

That portion of the value produced, which accrues in this 
manner to the landed proprietor, is called the profit of land; which 
is sometimes transferred to the farmer, in consideration of a fixed 
rent. 

The portion assigned to the capitalist, or person making the 
advances, however minute and for however short a period of 
time, is called the profit of capital; which capital is sometimes 
lent, and the profit relinquished on condition of a stipulated in- 
terest. 

The portion assigned to the mere mechanic or labourer is 



270 ON DISTRIBUTION. book n. 

called the profit of labour ; which is sometimes relinquished for 
a fixed salary.* («) 

Thus, each class receives its respective share of the total 
value produced ; and this share composes its revenue. Some 
classes receive their share piecemeal, and consume as fast as 
they receive it ; and these are the most numerous, for they com- 
prise most of the labouring classes. The land-holder and the 
capitalist, who do not themselves turn their means to account, 
receive their revenue periodically, once or twice, or perhaps 
four times a year, according to the terms of the contract with the 
transferee. But, in whatever manner a revenue may be derived, 
it is always analogous in its nature, and must originate in actual 
value produced. Whatever value an individual receives in satis- 
faction of his wants, without having either directly or indirectly 
concurred in production of some kind or other, must be wholly 
either a gratuitous gift or a spoliation ; there is no other alterna- 
tive. 

It is in this way, that the total value of products is distributed 
amongst the members of the community ; I say, the total value, 
because such part of the whole value produced, as does not go 
to one of the concurring producers, is received by the rest. The 
clothier buys wool of the farmer, pays his workmen in every de- 
partment, and sells the cloth, the result of their united exertion, 
at a price that reimburses all his advances, and affords himself a 
profit. He never reckons as profit, or as the revenue of his own 
industry, any thing more than the net surplus, after deducting all 
charges and outgoings ; but those outgoings are merely an advance 
of their respective revenues to the previous producers, which are 
refunded by the gross value of the cloth. The price paid to the 
farmer for his wool is the compound of the several revenues of 
the cultivator, the shepherd, and the landlord. Although the 
farmer reckons as 7iet produce only the surplus remaining after 
payment of his landlord and his servants in husbandry, yet to 

* In the above instance of the watch, many of the artisans are them- 
selves the adventurers in respect to their own industry ; in which case 
their receipts are profits, not wages. If the maker exclusively of the chain 
himself buys the steel in its rude state, works it up, and sells the chain on 
his own account, he is the adventurer in respect to this particular part of 
the manufacture. A flax-spinner buys a few penny-worth of flax> spins it, 
and converts her thread into money. Part of this money goes to the pur- 
chase of more flax ; this is her capital ; another portion is spent in satisfying 
her wants ; this is the joint profit of her industry, and her little capital, and 
forms her revenue. 



(a) Where slavery is tolerated, the slave is a mere machine, the revenue 
of which goes to the master, who defrays the charge of its maintenance. 
His productive agency is an object of appropriation, the recompense for 
which, like that of appropriated natural agency, is paid to the appropria- 
tor. T. 



CHAP. V. ON DISTRIBUTION. 271 

them these payments are items of revenue, — rent to the one and 
wages to the other ; to the one, the revenue of his land, to the 
other, the revenue of his industry. The aggregate of all these 
is defrayed out of the value of the cloth, the whole* of which 
forms the revenue of some one or other, and is entirely absorbed 
in that way. 

Whence it appears, that the term net produce appUes only to 
the individual revenue of each separate producer or adventurer 
in industry ; but that the aggregate of individual revenue, the 
total revenue of the community, is equal to the gross produce of 
its land, capital, and industry. Which entirely subverts the sys- 
tem of the economists of the last century, who considered no- 
thing but the net produce of the land as forming revenue, and 
therefore concluded, that this net produce was all that the com- 
munity had to consume ; instead of admitting the obvious infer- 
ence, that the whole of what has been created, may also be con- 
sumed by mankind. I (a) 

If national revenue consisted of the mere excess of value pro- 
duced above value consumed, this most absurd consequence 
would be inevitable ; viz. that, where a nation consumes in the 
year the total of its annual product, it will have no revenue what- 
ever. Is a man possessed of an income of 10,000 fr. a year to 
be said to have no revenue, because he may think proper to spend 
the whole of it? 

The whole amount of profit derived by an individual from his 
land, capital, and industry, within the year, is called his annual 
revenue. The aggregate of the revenues of all the individuals, 

* Even that portion of the gross value, which is absorbed in the mainte- 
nance or restoration of the vested capital or machinery. If his works need 
repairs, which are executed by the proper mechanic, the sum expended in 
them forms the revenue of that mechanic, and is to the clothier a simple 
advance, which is refunded, like any other, by the value of the product 
when completed. 

t Part of the value created is due to natural agency, amongst which that 
of land is comprised. But, as stated above in Book I., land is treated as a 
machine or instrument, and its appropriator as the producer that sets it in 
motion; in like manner as the productive quality of capital is said to be the 
productive quality of the capitalist to whom it belongs. Mere verbal criti- 
cism is of little moment; when once the meaning is explained, it is the cor- 
rectness of the idea, and not of the expression, that is material. 



(a) Perhaps the real difference between the old economists and the new 
ones may not be so wide as some people have imagined. They seem to 
have taken revenue in a more limited sense, than the new school has done ; 
confining that denomination to that portion of the general produce, which 
remains as a surplus after defraying all the charges of human productive 
agency. Now it is evident, even by our author's own showing, that this 
whole surplus is the product of appropriated natural agency ; for the con- 
currence of capital is that of human agency ; capital being the reserved 
product of past exertion, T. 



272 ON DISTRIBUTION. book ii. 

whereof a nation consists, is its national revenue.* Its sum is 
the gross value of the national product, minus the portion exported ; 
for the relation of one nation, is like that of one individual to an- 
other. The profits of an individual are limited to the excess of 
his income above his expenditure, which expenditure, indeed, 
forms the revenue of other persons, but, if those persons be fo- 
reigners, must be reckoned in the estimate of the revenue of the 
respective nations they may belong to. Thus, for instance, when 
a consignment of ribbons is made to Brazil to the amount of 
10,000 fr. and the returns received in cotton, in estimating the 
resulting product to France from this act of dealing, the export 
made to Brazil in payment of the cotton must be deducted. Sup- 
posing the investment of ribbons to procure, say 40 bales of cot- 
ton, which, when they reach France, will fetch 12,000/r., 2000/r. 
only of that sum will go to the revenue of France, and the resi- 
due to that of Brazil. 

Did all mankind form but one vast nation or community, it 
would be equally true in respect to mankind at large, as to the 
internal product of each insulated nation, that the whole gross 
value of the product would be revenue. But so long as it shall 
be necessary to consider the human race as spht into distinct 
communities, taking each an independent interest, this circum- 
stance must be taken into the account. Wherefore, a nation, 
whose imports exceed its exports in value, gains in revenue to 
the extent of the excess ; which excess constitutes the profit of 
its external commerce. A nation that should export to the value 
of 100,000 fr. and import to the value of 120,000 /r. wholly in 
goods, without any money passing on either side, would make a 
profit of 20,000 /r., in direct contradiction to the theory of the 
partisans of the balance of trade. f 

The voluminous head of perishable products consumed within 
the year, nay, often at the very moment of production, as in the 
case of all immaterial products, is nevertheless an item of nation- 
al revenue. For what are they but so many values produced 
and consumed in the satisfaction of human wants, which are the 
sole characteristics of revenue ? 

The estimation of individual and of national revenue is made 
in the same way, as that of every collection of values, under 
whatever varieties of form ; as of the estate of a deceased per- 
son. Each product is successively valued in money or coin. 

* The term, national revenue, has been sometimes incorrectly applied to 
the financial receipts of the state. Individuals, indeed, pay their taxes out 
of their respective revenues; but the sum levied by taxation is not revenue, 
but rather a tax upon revenue, and sometimes unhappily upon capital too. 

t Their profit arises from increase of value efiected by the transport upon 
both the export and the import, by the time they have reached their desti- 
nation respectively. 



CHAP. V. ON DISTRIBUTION. 273 

For instance, the revenues of France are said to amount to 
8,000,000,000 /r.; which by no means implies, that the commerce 
of France produces a return of that amount in specie. Probably 
a very small amount of specie, or none at all, may have been 
imported. All that is meant by the assertion is, that the aggre- 
gate annual products of the nation, valued separately and suc- 
cessively in silver coin, make the total value above stated. The 
only reason of making the estimate in money is, the greater faci- 
lity acquired by habit of forming an idea of the unchangeable 
value of a specific amount of money, than of other commodities. 
Were it not for that facility, it would be quite as well to make the 
estimate in corn ; and to say, that the revenues of France 
amounted to 400,000,000 hectolitres of wheat, which, at 20 fr. 
the hectolitre, would make precisely the same amount. 

Money facilitates the circulation from hand to hand of the va- 
lues composing both revenue and capital; but is itself not an item 
of annual revenue, not being an annual product, but a product of 
previous commerce or metallurgy, of a date more or less remote. 
The same coin has effected the circulation of the former year, 
possibly of the former century, and has all the while remained 
the same in amount; nay, if the value of its material have decli- 
ned in the interim, the nation will even have lost upon its capital 
existing under the form of money; just in the same way as a mer- 
chant would lose upon the fall of price of the goods in his ware- 
houses. 

Thus, although the greater part of revenue, that is to say, of 
value produced, is momentarily resolved into money, the money, 
the quantity of silver coin itself, is not what constitutes revenue ; 
revenue is value produced, wherewith that quantity of silver coin 
has been bought; and, as that value assumes the form of money 
but for a moment, the same identical pieces of money are made 
use of many times in the course of a year, for the purpose of pay- 
ing or receiving specific portions of revenue. Indeed, some por- 
tions of revenue never assume the form of money at all. The 
manufacturer, that boards his workmen himself, pays part of their 
wages in food ; so that this far greater portion of the mechanic's 
revenue is paid, received, and consumed, without having once 
taken the shape of money, even for an instant. In the United 
States of America, and in countries similarly circumstanced, it is 
not uncommon for the colonist to derive from the produce of his 
own estate, food, lodging, and raiment for the v.'hole of his estab- 
lishment ; receiving and consuming his whole revenue in kind, 
without any intervention of money whatsoever. 

I think I have said enough to warn the reader against con- 
founding the money, into which revenue may be converted, with 
revenue itself; and to establish a conviction that the revenue of 
an individual, or of a nation, is not composed of the money re- 
ceived in lieu of the products of his or their creation, but is the 

43 



274 ON DISTRIBUTION. book ii. 

actual product or its value, which, by a process of exchange, may 
undoubtedly arrive at its destination in the shape of a bag of 
crown pieces, or in any other shape whatsoever. 

No value, whether received in the shape of money or other- 
wise, can form a portion of annual revenue, unless it be the pro- 
duct, or the price of a product, created within the year : all else 
is capital, — is property passing from one hand to another, either 
in exchange, as a gift, or by inheritance. For an item of capital, 
or one of revenue, may be transferred or paid any how, whether 
in the shape of personal or real, of moveable or immoveable pro- 
perty, or of money. But, no matter what shape it assume, reve- 
nue differs from capital essentially in this, that it is the result or 
product of a pre-existing source, whether land, capital, or indus- 
try. 

It has with some been a matter of doubt, whether the same va- 
lue, which has already been received by one individual as the pro- 
fit or revenue of his land, capital, or industry, can constitute the 
revenue of a second. For instance, a man receives 100 crowns 
in part of his personal revenue, and lays it out in books; can this 
item of revenue, thus converted into books, and in that shape 
destined to his consumption, further contribute to form the reve- 
nue of the printer, bookseller, and all the other concurring agents 
in the production of the books, and be by them consumed a se- 
cond time? The difficulty may be solved thus. The value form- 
ing the revenue of the first individual, derived from his land, capi- 
tal, or industry, and by him consumed in the shape of books, 
was not originally produced in that form. There has been a 
double production: 1. of corn perhaps by the land and the indus- 
try of the farmer, which has been converted into crown pieces, 
and paid as rent to the proprietor: 2. of books by the capital and 
industry of the bookseller. The two products have been subse- 
quently interchanged one for the other, and consumed, each by 
the producer of the other ; having arrived at the particular form 
adapted to their respective wants. 

So likewise of immaterial products. The opinion of the law- 
yer, the advice of the physician, is the product of their respective 
talents and knowledge, which are their peculiar productive means. 
If the merchant have occasion to purchase their assistance, he 
gives for it a commercial product of his own converted into mo- 
ney. Each of them ultimately consumes his own revenue re- 
spectively, transformed into the object best adapted to his pecu- 
liar occasions. 



ON DISTRIBUTION. 275 



CHAPTER VI. 

OF WHAT BRANCHES OF PRODUCTION YIELD THE MOST LIBERAL 
RECOMPENSE TO PRODUCTIVE AGENCY. 

The aggregate value of a product, in the way just described, 
refunds to its different concurring producers the amount of their 
advances, with the addition in most cases, of a profit, that con- 
stitutes their revenue. But the profits of productive agency are 
not of equal amount in all its branches; some yielding but a very 
scanty revenue for the land, capital, or industry, embarked in 
them; while others give an exorbitant return. 

True it is, that productive agents always endeavour to direct 
their agency to those employments, in which the profits are the 
greatest, and thus, by their competition have as much tendency 
to lower price, as demand has to raise it; but the effects of com- 
petition can not always so nicely proportion the supply to the 
demand, as in every case to ensure an equal remuneration. Some 
kinds of labour are scantily supplied, in countries where people 
are not accustomed to them; and capital is often so sunk in a 
particular channel of production, that it can never be transferred 
to any other from that wherein it was originally embarked. Be- 
sides, the land may stubbornly resist that kind of cultivation, 
whose products are in the greatest demand. 

One can not trace the fluctuation of profit on each particular 
occasion. A wonderful change may be effected by a new inven- 
tion, a hostile invasion, or a seige. Such partial circumstances 
may influence or derange the operation of general causes, but 
can not destroy their general tendency. No dissertation, how- 
ever voluminous, could be made to embrace every individual cir- 
cumstance, that, by possibility may influence the relative value 
of objects; but one may specify general causes, and such as 
have an uniform activity ; thereby enabling every one, when the 
particular occasion may present itself, to estimate the effect pro- 
duced by the operation of partial and transient circumstances. 

It may appear extraordinary at first sight, but will on inquiry 
be found generally true, that the largest profit is made, not on 
the dearest commodities or upon those which are least indispen- 
sable, but rather on those, which are the most common and least 
to be dispensed with. In fact, the demand for these latter is 
necessarily permanent; for it is stimulated by actual want, and 
grows with every increase of the means of production ; inasmuch 
as nothing tends to increase population more, than providing the 
means of its subsistence. The demand for superfluities, on the 



276 ON DISTRIBUTION. book ii. 

contrary, does not expand with the increased power of producing 
them. An extraordinary run, which, by the way, can never take 
place but in large towns, may raise the current, considerably 
above the natural price; that is to say, above the actual cost of 
production; or a change of fashion may again depress it infinite- 
ly below that point. Superfluities are, after all, but objects of 
secondary want even to the rich themselves ; and (he demand for 
them is limited to the very small number of persons that can in- 
dulge in them. When a casual calamity obliges individuals to re- 
duce their expenditure, when their revenues are curtailed by the 
ravages of war, by taxation, or by natural scarcity, the first items 
of retrenchment are always the articles of least necessary con- 
sumption. And this may serve, perhaps, to explain, why the 
productive agency directed to the raising of superfluities, is gene- 
rally worse paid than that otherwise employed. 

I say generally, for it is possible enough that, in a great me- 
tropolis, where the demand for luxuries is more urgent than else- 
where, and the dictates of fashion, however absurd, more impli- 
citly obeyed than the eternal laws of nature; where a man will, 
perhaps, be content to lose his dinner, so he may appear in the 
evening circle in embroidered ruffles, it is possible, that in such 
a place the price of the gewgaws may sometimes very liberally 
reward the labour and capital devoted to their production. But, 
except in such particular cases, balancing one year's profits with 
another, and allowing for contingent losses, and it has been as- 
certained, that the adventurers in the production of superfluities 
make the most scanty profits, and that their workmen are the 
worst paid. The manufacturers of the finest laces in Normandy 
and Flanders are a very indigent set of people; and at Lyons, 
the workers of gold-embroidery are absolutely clothed in rags. 
Not but that very considerable profits have occasionally been de- 
rived from such articles. A hat-maker has been known to make 
a fortune by a fancy hat; but, taking all the profits made on su- 
perfluities, and deducting the value of goods remaining unsold, 
or, though sold, never paid for, we shall find that this class of 
products affords, on the whole, the scantiest profit. The most 
fashionable tradesmen are oftenest in the list of bankrupts. 

Commodities of general use are attainable by a greater number 
of persons, and are in demand with almost every class of society. 
The chandelier is to be found only in the mansions of the rich ; 
but the meanest cottage is furnished with the convenience of a 
candlestick: the demand for candlesticks is, therefore, regular, 
and always more brisk than that for chandeUers ; and, even in 
the most opulent country, the total value of the candlesticks is 
far greater than that of the chandeliers. 

The articles of human food are unquestionably those of most 
indispensable use; the demand for them recurs daily; and no 
occupations are so regular as those which minister to human sus- 



CHAP. VI. ON DISTRIBUTION. 277 

tenance. Wherefore, it is they that yield the most certain profit, 
notwithstanding the effects of brisk competition.* The butchers, 
bakers, and porkmen, of Paris, are pretty sure to retire with a 
fortune sooner or later; indeed, I have it from pretty good au- 
thority in such matters, that half the houses and real property 
sold in Paris and the environs, is bought up by tradesmen in 
those lines. 

It is on this account, that individuals and nations, who under- 
stand their true interest, unless they have very cogent reasons 
for acting otherwise, apply themselves in preference to the pro- 
duction of what tradesmen call current articles. Mr. Eden, who, 
in 1706, negotiated on the part of Great Britain the treaty of 
commerce concluded by M. de Vergennes, went upon this prin- 
ciple, in stipulating the free import of the common English earth- 
enware into France. " The few dozens of plates we may sell 
you," said the English agent, " will be a poor set-off against the 
magnificent services of Sevres porcelain we shall take of you." 
This appeal to the vanity of the French agent was decisive. 
But, as soon as the English earthenware was admitted, its light- 
ness, cheapness, and convenience and simplicity of form, recom- 
mended it to the most moderate establishments; its regular im- 
port, in a short time, amounted to many millions, and continued 
increasing every year until the war. The exportation of Sevres 
china, was a mere trifle in comparison. 

The scale for current articles, besides being more considera- 
ble, is likewise more steady. A tradesman is never long in dis- 
posing of common linen shirting. 

The examples I have selected from the class of manufacture 
might easily be paralleled in the agricultural and commercial 
branches. A much larger value is consumed in lettuces than in 
pine apples, throughout Europe at large; and the superb shawls 
of Cachemere are, in France, a very poor object of trade, in 
comparison with the plain cotton goods of Rouen. 

Wherefore, it is a bad speculation for a nation to aim at the 
export of objects of luxury, and the import of objects of general 
utility. France supplies Germany with fashions and finery, 
which very few persons can make use of; and Germany makes 
the return in tapes and other merceries, in files, scythes, shovels, 
tongs, and other hardware of common use. But for the wines 
and oils of France, the annual product of a soil highly favoured 
by nature, together with a few products of superior execution, 

* I speak here of tke adventurers, masters, or tradesmen ; the mere la- 
bourer or journeyman benefits only, as it were, by re-action. The farmer, 
who is an adventurer in agriculture, employed in raising products for hu- 
man sustenance, lies under disadvantages, that very much curtail his pro- 
fits. His concerns are too much at the mercy of his landlord, and of the 
financial exactions of public authority, to say nothing of the vicissitudes of 
seasons, to be very gainful on the average. 



278 ON DISTRIBUTION. book ii. 

France would derivQ less advantage from Germany than Germa- 
ny from France. The same may be said of the French trade 
with the north of Europe, (a) 



CHAPTER VII. 

or THE REVENUE OF INDUSTRY. 

SECTION I. 

Of the Profits of Industry in general. 

The general motives, which stimulate the demand of products, 
have been above investigated."* When the demand for any pro- 
duct whatever, is very lively, the product agency, through whose 
means alone it is obtainable, is likewise in brisk demand, which 
necessarily raises its ratio of value : this is true generally, of 
every kind of productive agency. Industry, capital, and land, 
all yield, ceteris paribus, the largest profits, when the general de- 
mand for products is most active, affluence most expanded, pro- 
fits most widely diffused, and production most vigorous and pro- 
lific. 

In the preceding chapter, we have seen, that the demand for 
some products is always more steady and active than for others. 
Whence, we have inferred, that the agency directed to those 
particular products, receives the most ample remuneration. 

Descending in our progress more and more into particular de- 

* Book I. c. 15. 



(«) The reasoning of this whole chapter is superfluous and inconclusive. 
Where value is left to find its natural level, one class" of productive agency 
will, in the long run, be equally recompensed with another, presenting an 
equipoise of facility or difficulty, of repute or disrepute, of enjoyment or 
suffering, in the general estimation of mankind ; this he states fully in the 
next chapter. If our author means here to say merely, that a large class of 
productive agency will receive a larger portion of the general product as its 
recompense or revenue, or that agency in permanent employ will obtain a 
regular and permanent recompense, he has taken a very circuitous mode of 
expressing a position, which is, indeed, almost self-evident. The grand di- 
vision of productive agency is into corporeal a.nd intellectual; whereof the 
former is, on the average, the more amply rewarded by the rest of mankind, 
because the latter, in some measure, rewards itself. Thus, the profits of 
printing and bookselling are, on the whole, more liberal than those of au- 
thorship ; because the latter is paytly paid in self-gratification, in vanity, or 
eonscious merit. T. 



CHAP. VII. ON DISTRIBUTION. 279 

tail, we shall examine in this, and some following chapters, in 
what cases the profits of industry bear a greater or a less propor- 
tion to those of capital and of land, and vice versa; together with 
the reasons why certain ways of employing industry, capital, or 
land, are more profitable than others. 

To begin then, with the comparison of the relative profits of 
industry, to those of capital and land, we shall find these bear the 
highest ratio, where abundance of capital creates a demand for 
a great mass of industrious agency; as it did in Holland before 
the revolution. Industrious agency was very dearly paid there; 
as it still is in countries like the United States of America, where 
population, and consequently, the human agents of production, 
spite of their rapid increase, bear no proportion to the demands 
of an unlimited extent of land, and of the daily accumulation of 
capital by the prevalence of frugal habits. 

In countries thus circumstanced, the condition of man is ge- 
nerally the most comfortable ; because those, who live in idle- 
ness upon the profits of their capital and land, are better able to 
live on moderate profits, than those who live upon the profits of 
their own industry only; the former, besides the resource of liv- 
ing on their capital, can, when they please, add the profits of in- 
dustry to their other revenue; but the mere mechanic or labour- 
er can not add at pleasure to the profits of his industry those of 
capital and land, of which he possesses none. 

Proceeding next to compare the profits of diflferent branches 
of industrious agency one with another, we shall find them great- 
er or less in proportion, 1st, to the degree of danger, trouble, or 
fatigue, attending them, or to their being more or less agreeable; 
2dly, to the regularity or irregularity of the occupation; 3dly, to 
the degree of skill or talent that may be requisite. 

Every one of these causes tends to diminish the quantity of 
labour in circulation in each department, and consequently to 
vary its natural rate of profit. It is scarcely necessary to cite 
examples in support of propositions so very evident. 

Among the agreeable or disagreeable circumstances attending 
an occupation, must be reckoned the consideration or contempt 
which it entails. Some professions are partly paid in honour. 
Of any given price, the more is paid in this coin, the less may be 
paid in any other, without deducing the ratio of price. Smith 
remarks, that the scholar, the poet, and the philosopher, are al- 
most wholly paid in personal consideration. — Whether with rea- 
son or from prejudice, this is not entirely the case with the pro- 
fessions of a comic actor, a dancer, and innumerable others; 
they must, therefore, be paid in money what they are denied in 
estimation. " It seems absurd at first sight," says Smith, " that 
we should despise their persons, and yet reward their talents 
with the most profuse liberality. Whilst we do the one, how- 
ever, we must of necessity do the other. Should the public opi- 



2S0 ON DISTRIBUTION. book ii. 

nion or prejudice ever alter with regard to such occupations, their 
pecuniary recompense would quickly diminish. More people 
would apply to them, and the competition would quickly reduce 
the price of their labour. Such talents, though far from being 
common, are by no means so rare as is imagined. Many peo- 
ple possess them in great perfection, who disdain to make this 
use of them ; and many more are capable of acquiring them, if 
any thing could be honourably made by them.'^ 

In some countries, the Inunctions of national administration are 
requited at the same time with high honour and large emolument ; 
but it is only so, where, instead of being open to free competi- 
tion, like other occupations and professions, they are in the dis- 
posal of royal favour. A nation, awake to its true interest, is 
careful not to lavish this double recompense upon official medi- 
ocrity; but to husband its pecuniary bounty, where it is prodigal 
of distinction and authority. 

Every temporary occupation is dearly paid ; for the labourer 
must be indemnified as well for the time he is employed, as for 
that during which he is waiting for employment. A job coach- 
master must charge more for the days he is employed, than may 
appear sufficient for his trouble and capital embarked, because 
the busy days must pay for the idle ones; any thing less would be 
ruin to him. The hire of masquerade dresses is expensive for 
the same reason ; the receipts of the carnival must pay for the 
whole year. Upon a cross road, an inn-keeper must charge 
high for indifferent entertainment ; for he may be some days be- 
fore the arrival of another traveller. 

However, the proneness of mankind to expect, that, if there 
be a single lucky chance, it will be sure to fall to their peculiar 
lot, attracts towards particular channels a portion of industry dis- 
proportionate to the profit they hold out. ' In a perfectly fair 
lottery,' says the author of the Wealth of Nations, ' those who 
draw prizes ought to gain all that is lost by those who draw 
blanks. In a profession, where twenty fail for one that succeeds, 
that one ought to gain all that should have been gained by the 
unsuccessful twenty,'| Now many occupations are far from be- 
ing paid according to this rate. The same author states his be- 
lief, that, how extravagant soever the fees of counsellors at law 
of celebrity may appear, the annual gains of all the counsellors 
of a large town bear but a very small proportion to their annual 
expense; so that this profession must, in great part, derive its 
subsistence from some other independent source of revenue. 

It is hardly necessary to state, that these several causes of dif- 
ference in the ratio of profit may act all in the same, or each in an 
opposite direction ; or that, in the former case, the effect is more 

* Wealth of Nations, book i. c. 10. 
t Wealth of Nations, book i. c. 10. 



CHAP. VII. ON DISTRIBUTION. 281 

intense; whereas, in the latter, the opposite action of one con- 
trols and neutralizes the other. It would be a waste of time to 
prove, that the agreeable circumstances of a profession may ba- 
lance the uncertainty of its product: or that a business that does 
not furnish constant occupation, and is moreover attended with 
danger, must be indemnified by a double increase of salary. 

The last, and perhaps the principal cause of inequality in the 
profits of industry in general is, the degree of skill it may require. 

When the skill requisite to any calling, whether of a superior 
or subordinate character, is attainable only by long and expensive 
training, that training must every year have involved a certain 
expense, and the total outlay forms an accumulated capital. In 
such case, its remuneration includes, over and above the wages 
of labour, an interest upon the capital advanced in the training, 
and an interest higher than the ordinary rate ; for the capital ad- 
vanced has been actually sunk, and exists no longer than the life 
of the individual. It should, therefore, be calculated as an an- 
nuity.* 

It is for this reason, that all employments of time and talents, 
which require a liberal education, are better paid than those, 
which require less education. Education is capital which ought 
to yield interest, independent of the ordinary profits of industry. 

There are facts, it is true, that militate against this principle ; 
but they are capable of explanation. The priesthood is some- 
times very ill paid ;| yet a religion, founded upon very complica- 

* Nay, even more than annuity interest on the sums spent in the educa- 
tion of the person who receives the salary; strictly speaking, it should be 
annuity interest upon the total sum devoted to the same class of study, 
whether it have or have not been made productive in its kind. Thus the 
ag-g-regate of the fees of physicians ought to replace not only what has been 
spent in their studies, but, in addition, all the sums expended in the in- 
struction of the students, who may have died during their education, or 
whose success may not have repaid the care bestowed upon them ; for the 
stock of medical industry in actual existence could never have been reared, 
without the loss of some part of the outlay devoted to medical instruction. 
However, there is little use in too minute attention to accuracy in the esti- 
mates of political economy, which are frequently found at variance with 
fact, on account of the influence of moral considerations in the matter of 
national wealth, an influence that does not admit of mathematical estima- 
tion. The forms of algebra are therefore inapplicable to this science, and 
serve only to introduce unnecessary perplexity. Smith has not once had 
recourse to them. 

1 1 do not mean to include the superior orders of the clergy, whose bene- 
fices are extremely rich and well paid, though upon principles of state po- 
licy, (a) 



(a) In estimating the recompense of a national priesthood the total of its 
revenues, both in the higher and lower ranks, must be taken into the ac- 
count. The gambling propensity of mankind, and that proneness to ex- 
pect the lucky chances, which has been above adverted to, makes human 
industry always overflow those channel«, in which there are some few great 

44 



282 ON DISTRIBUTION. book it. 

ted doctrines, and obscure historical facts, requires in its minis- 
ters a long course of study and probation, and such study and 
probation necessarily call for an advance of capital; it would 
seem requisite, therefore, for the continued existence of the cleri- 
cal profession, that the salary of the minister should pay the in- 
terest on the capital expended, as well as the wages of his per- 
sonal trouble, which the profits of the inferior clergy rarely ex- 
ceed, particularly in catholic countries. It must, however, be 
ascertained, whether the public have not themselves advanced 
this capital in the maintenance and education of clerical students 
at the public charge; in which case, the public advancing the 
capital may find people enough to execute the duties for the 
mere wages of their labour, or a bare subsistence, especially 
where there is no family to be provided for. 

When, besides expensive training, peculiar natural talent is 
required for a particular branch of industry, the supply is still 
more limited in proportion to the demand, and must consequent- 
ly be better paid. A great nation will probably contain but two 
or three artists capable of painting a superior picture, or model- 
ling a beautiful statue; if such objects, then, be much in demand, 
those few can charge almost what they please; and, though 
much of the profit is but the return with interest of capital ad- 
vanced in the acquisition of their art, yet the profits it brings 
leaves a very large surplus, (a) A celebrated painter, advocate, 
or physician, will have spent, of his own or relation's money, 
30,000/r., or 40,000 /r. at most, in acquiring the ability from 
which his gains are derived; the interest of this sum calculated 
as an annuity is but 4000/r. ; so that, if he make 30,000/}'. by 
his art, there remains an annual sum of 26,000 fr. which is 
wholly the salary of his skill and industry. If every thing af- 
fording revenue is to be set down as property, his fortune at ten 
years' purchase may be reckoned 260,000 /r., even supposing 
him not to have inherited a sol. 



prizes, and an immensity of blanks ; as in the church and the law, which 
have moreover the attraction of personal consideration, at least in the con- 
stitution of English Society. T. 

(a) From which, however, is to be deducted the average loss, on the ge- 
neral balance of less successful competitors in the same line. It does not 
appear, that, in England at least, any allowance is to be made for personal 
consideration, which is seldom attached in a high ratio even to the greatest 
excellence in the departn^ent of pure art. There is no instance of a sculp- 
tor or a painter arriving at the honours of the peerage, which have been 
placed within the reach of successful commercial enterprise. T. 



CHAP. vn. ON DISTRIBUTION. 283 

SECTION II. 

Of the Profits of the JVEan of Science. 

The philosopher, the man who makes it his study to direct 
the laws of nature to the greatest possible benefit of mankind, re- 
ceives a very small proportion of the products of that industry, 
which derives such prodigious advantage from the knowledge, 
whereof he is at the same time the depositary and the promoter. 
The cause of his disproportionate payment seems to be, that, to 
speak technically, he throws into circulation, in a moment, an 
immense stock of his product, which is one that suffers very lit- 
tle by wear; so that it is long before operative industry is oblig- 
ed to resort to him for a fresh supply. 

The scientific acquirements, without which abundance of ma- 
nufacturing processes could never have been executed, are pro- 
bably the result of long study, intense reflection, and a course of 
experiments equally ingenious and delicate, that are the joint oc- 
cupation of the highest degree of chemical, medical, and mathe- 
matical skill. But the knowledge, acquired with so much diffi- 
culty, is probably transmissible in a few pages; and, through the 
channel of public lectures, or of the press, is circulated in much 
greater abundance, than is required for consumption; or rather, 
it spreads of itself, and, being imperishable, there is never any 
necessity to recur to those, from whom it originally emanated. 

Thus, according to the natural laws, whereby the price of 
things is determined, this superior class of knowledge will be 
very ill paid: that is to say, it will receive a very inadequate por- 
tion of the value of the product, to which it has contributed. It 
is from a sense of this injustice, that every nation, sufficiently 
enlightened to conceive the immense benefit of scientific pur- 
suits, has endeavoured, by special favours and flattering distinc- 
tions, to indemnify the man of science, for the very trifling profit 
derivable from his professional occupations, and from the exer- 
tion of his natural or acquired faculties. 

Sometimes a manufacturer discovers a process, calculated 
either to introduce a new product, to increase the beauty of an 
old one, or to produce with greater economy ; and, by obser- 
vance of strict secrecy, may make for many years, for his whole 
life perhaps, or even bequeath to his children, profits exceeding 
the ordinary ratio of his calling. In this particular case the ma- 
nufacturer combines two different operations of industry ; that 
of the man of science, whose profit he engrosses himself, and 
that of the adventurer too. But few such discoveries can long 
remain secret; which is a fortunate circumstance for the public, 
because this secrecy keeps the price of the particular product it 



2S4 ON DISTRIBUTION. book ii. 

applies to above, and the number of consumers enabled to enjoy 
it below, the natural level.* 

It is obvious, that I am speaking only of the revenue a man of 
science derives from his calling. There is nothing to prevent 
his being at the same time a landed proprietor, capitalist, or ad- 
venturer, and possessed of other revenue in these different capa- 
cities. 



SECTION III. 

Of the Profits of the Master-agent, or Adventurer, in Industry. 

We shall, in this section, consider only that portion of the pro- 
fits of the master-agent, or adventurer, which may be considered 
as the recompense of that peculiar character. If a master-manu- 
facturer have a share of the capital embarked in his concern, he 
must be ranked pro ianto in the class of capitalists, and the be- 
nefits thence derived be set down as part of the profits of the ca- 
pital so embarked. "I" 

It very seldom happens, that the party engaged in the ma- 
nagement of any undertaking, is not at the same time in the re- 
ceipt of interest upon some capital of his own. The manager of 
a concern rarely borrows from strangers the whole of the capital 
employed. If he have but purchased some of the implements 
with his own capital, or made advances from his own funds, he 
will then be entitled to one portion of his revenue in quality of 
manager, and another in that of capitalist. Mankind are so httle 
inclined to sacrifice any particle of their self-interest, that even 
those, who have never analyzed these respective rights, know 
well enough how to enforce them to their full extent in practice. 

Our present concern is, to distinguish the portion of revenue, 
which the adventurer receives as adventurer. We shall see by- 
and-by, what he, or somebody else, derives in the character of 
capitalist. 

It may be remembered, that the occupation of adventurer is 

* Such of my readers as may imagine, that the sum of the production of 
a country is greater, when the scale of price is unnaturally high, are re- 
quested to refer to what has been said on the subject, supra, Chap. 3. of 
this Book. 

t Smith is greatly embarrassed by his neglect of the distinction between 
the profits of superintendency, and those of capital. He confounds them 
under the general head of profits of stock; and all his sagacity and acute- 
ness have scarcely been sufficient to expound the causes, which influence 
their fluctuations. Wealth of Nations, book i. c. 8. And no wonder he 
found himself thus perplexed; their value is regulated upon entirely differ- 
ent principles. The profits of labour depend upon the degree of skill, acti- 
vity, judgment, &c. exerted ; those of capital, on the abundance or scarcity 
of capital, the security of the investment, &c. 



CHAP. vii. ON DISTRIBUTION. 285 

comprised in the second class of operations specified as necessa- 
ry for the setting in motion of every class of industry whatever ; 
that is to say, the application of acquired knowledge to the crea- 
tion of a product for human consumption.* It will likewise be 
recollected, that such application is equally necessary in agricul- 
tural, manufacturing, and commercial industry ; that the labour 
of the farmer or cultivator on his own account, of the master- 
manufacturer and of the mer^^hant, all come under this descrip- 
tion ; they are the adventurers in each department of industry 
respectively. The nature of the profits of these three classes of 
men, is what we are now about to consider. 

The price of their labour is regulated, like that of all other ob- 
jects, by the ratio of the supply, or quantity of that labour thrown 
into circulation, to the demand or desire for it. There are two 
principal causes operating to limit the supply, which, consequent- 
ly, maintain at a high rate the price of this superior kind of la- 
bour. 

It is commonly requisite for the adventurer himself to provide 
the necessary funds. Not that he must be already rich ; for he 
may work upon borrowed capital ; but he must at least be sol- 
vent, and have the reputation of intelligence, prudence, probity, 
and regularity; and must be able, by the nature of his connexions, 
to procure the loan of capital he may happen himself not to pos- 
sess. These requisites shut out a great many competitors. 

In the second place, this kind of labour requires a combination 
of moral qualities, that are not often found together. Judgment, 
perseverance, and a knowledge of the world, as well as of busi- 
ness. He is called upon to estimate, with tolerable accuracy, 
the importance of the specific product, the probable amount of 
the demand, and the means of its production : at one time he 
must employ a great number of hands ; at another, buy or order 
the raw material, collect labourers, find consumers, and give at all 
times a rigid attention to order and economy ; in a word, he must 
possess the art of superintendence and administration. He must 
have a ready knack of calculation, to compare the charges of 
production with the probable value of the product when comple- 
ted and brought to market. In the course of such complex ope- 
rations, there are abundance of obstacles to be surmounted, of 
anxieties to be repressed, of misfortunes to be repaired, and of 
expedients to be devised. Those who are not possessed of a 
combination of these necessary qualities, are unsuccessful in 
their undertakings ; their concerns soon fall to the ground, and 
their labour is quickly withdrawn from the stock in circulation ; 
leaving such only, as is successfully, that is to say, skilfully di- 
rected. Thus, the requisite capacity and talent limits the num- 
ber of competitors for the business of adventurers. Nor is this 
all: there is always a degree of risk attending such undertakings; 

* Vide supra. Book I. chap. 6. 



286 ON DISTRIBUTION. book ii. 

however well they may be conducted, there is a chance of fail- 
ure ; the adventurer may, without any fault of his own, sink his 
fortune, and in some measure his character ; which is another 
check to the number of competitors, that also tends to make 
their agency so much the dearer. 

All branches of industry do not require an equal degree of ca- 
pacity and knowledge. A farmer, who adventures in tillage, is 
not expected to have such extensive knowledge as a merchant, 
who adventures in trade with distant countries. The farmer 
rnay do well enough with a knowledge of the ordinary routine of 
two or three kinds of cultivation. But the science necessary for 
conducting a commerce with long returns is of a much higher or- 
der. It is necessary to be well versed, not only in the nature 
and quality of tlie merchandise in which the adventure is made, 
but likewise to have some notion of the extent ot" demand, and of 
the markets whither it is consigned for sale. For this purpose, 
the trader must be constantly informed of the price-current of eve- 
ry commodity in ditferent parts of the world. To form a correct 
estimate of these prices, he must be acquainted with the different 
national currencies, and their relative value, or, as it is termed, 
the rate of exchange. He must know the means of transport, 
its risk and expense, the custom and laws of the people he cor- 
responds with ; in addition to all which, he must possess suffi- 
cient knowledge of mankind to preserve him from the dangers of 
misplaced confidence in his agents, correspondents, and connex- 
ions. If the science requisite to make a good farm is more com- 
mon than that which can make a good merchant, it is not sur- 
prising, that the labour of the former is but poorly paid, in com- 
parison with that of the latter. 

It is not meant by this to be understood, that commercial in- 
dustry in every branch, requires a combination of rarer qualifica- 
tions than agricultural. The retail dealers for the most part pur- 
sue the routine of their business quite as mechanically as the 
generality of farmers; and, in some kinds of cultivation, very un- 
common care and sagacity are requisite. It is for the reader to 
make the application: the business of the teacher is, firmly to es- 
tablish general principles; whence it will be easy to draw a mul- 
titude of inferences, varied and modified by circumstances, which 
are themselves the consequences of other principles laid down in 
other parts of the subject. Thus, in astronomy, when we are 
told, that all the planets describe equal areas in the same space 
of time, there is an implied reservation of such derangements, as 
arise from the proximity of other planets, whose attractive powers 
depend on another law of natural philosophy ; and this must be 
attended to in the examination of the phenomena of each in par- 
ticular. It is for him, who would apply general laws to particular 
and isolated cases, to make allowance for the influence of each 
of those laws or principles, whose e.\istence is already recognised. 



CHAP. VII. ON DISTRIBUTION. 287 

In reviewing presently the profits of mere manual labour, we 
shall see the peculiar advantage, which his character of master 
gives to the adventurer over the labourer ; but it may be useful 
to observe by the way the other advantages within reach of an 
intelligent superior. He is the link of communication, as well 
between the various classes of producers, one with another, as 
between the producer and the consumer. He directs the business 
of production, and is the centre of many bearings and relations; 
he profits by the knowledge and by the ignorance of other people, 
and by every accidental advantage of production. 

Thus, it is this class of producers, which accumulates the larg- 
est fortunes, whenever productive exertion is crowned by unusual 
success. 



SECTION IV. 

Of the Profits of the Operative Labourer.* 

Simple, or rough labour may be executed by any man pos- 
sessed of life and health ; wherefore, bare existence is all that is 
requisite to insure a supply of that class of industry. Conse- 
quently, its wages seldom rise in any country much above what 
is absolutely necessary to subsistence ; and the quantum of sup- 
ply always remains on a level with the demand ; nay, often goes 
beyond it ; for the difficulty lies not in acquiring existence, but 
in supporting it. Whenever the mere circumstance of existence 
is sufficient for the execution of any kind of work, and that work 
affords the means of supporting existence, the vacuum is speedi- 
ly filled up. 

There is, however, one thing to be observed. Man does not 
come into the world with the size and strength sufficient to per- 
form labour even of the simplest kind. He acquires this capabi- 
lity not till the age of fifteen or twenty, more or less, and may 
be regarded as an item of capital, formed of the growing annual 
accumulation of the sums spent in rearing him. j By whom, 
then, is this accumulation effected X In general by the parents of 

* By the term labourer, I mean, the person who works on account of a 
master-agent, or adventurer, in industry ; for such as are masters of their 
own labour, like the cobler in his stall, or the itinerant knife-grinder, unite 
the two characters of adventurer and labourer ; their profits being in part 
governed by the circumstances detailed in the preceding section, and partly 
by those developed in this. It is necessary also to premise, that the labour 
spoken of in the present section is that, which requires little or no study 
or training ; the acquisition of any talent or personal skill entitles the pos- 
sessor to a further profit, regulated upon the principles explained swprd, 
sect. 1. of this chapter. 

f A full grown man is an accumulated capital ; the sum spent in rearing 
him is indeed consumed, but consumed in a reproductive way, calculated 
to yield the product, man. 



2S8 ON DISTRIBUTION. book ir. 

the labourer, by persons of his own calling, or of one akin to it. 
In this class of life, therefore, the wages are somewhat more 
than is necessary for bare personal existence ; they must be suf- 
ficient to maintain the children of the labourer also. 

If the wages of the lowest class of labour were insufficient to 
maintain a family, and bring op children, its supply would never 
be kept up to the complement ; the demand would exceed the 
supply in circulation ; and its wages would increase, until that 
class were again enabled to bring up children enough to supply 
the deficiency. 

This would happen, if marriage were discouraged amongst the 
labouring class. A man without wife or children may afford his 
labour at a much cheaper rate, than one who is a husband 
and a father. If celibacy were to gain ground amongst the 
labouring class, that class would not only contribute nothing 
to recruit its own members, but would prevent others from sup- 
plying the deficiency. A temporary fall in the price of ma- 
nual labour, arising from the cheaper rate, at which single men 
can afford to work, would soon be followed by a dispropor- 
tionate rise ; because the number of workmen would fall oflf. 
Thus, even were it not more to the interest of masters to 
employ married men, on account of their steadiness, they should 
do so, though at a greater charge, to avoid the higher price 
of labour, that must eventually recoil on them. 

Every particular line or profession does not, indeed, recruit 
its own numbers with children nursed among its own members. 
The new generation is transferred from one class of life to another, 
and particularly from rural occupations to occupations of a si- 
milar cast in the towns ; for this reason, that children are cheap- 
er trained in the country : all I mean to say is, that the rudest 
and lowest class of labour necessarily derives from its product 
a portion sufficient, not merely for its present maintenance, but 
likewise for the recruiting of its numerical strength.* 

When a country is on the decline, and contains less of the 
means of production, and less of knowledge, activity, and capi- 
tal, the demand for rough and simple labour diminishes by de- 
grees ; wages fall gradually below the rate necessary for recruiting 
the labouring class ; its numbers consequently decrease, and the 
offspring of the other classes, whose employment diminishes 
in the same proportion, is degraded to the step immediately 

* The evidence examined before a committee of the House of Commons 
of England, in 1815, leads to the conclusion, that the high price of food, at 
that period, had the effect of depressing, rather than elevating the scale of 
wages. I have myself remarked the similar effect of the scarcities in 
France, of the years 1811 and 1817. The difficulty of procuring subsist- 
ence either forced more labourers into the market, or exacted more exer- 
tion from those already engaged ; thus occasioning a temporary glut of la- 
bour. But the necessary sufferings of the labouring class at the time must 
inevitably have thinned its ranks. 



CHAP. vii. ON DISTRIBUTION. 289 

below. On the contrary, when prosperity is advancing, the 
inferior classes not only fill up their own complement with 
ease, but furnish a surplus and addition to the classes imme- 
diately above them ; and some, by great good fortune or bril- 
liancy of talent, arrive at a still loftier eminence, and reach 
even the highest stations in society. 

The labour of persons not entirely dependent for subsistence 
on the fruits of labour can be afforded cheaper, than that of 
such as are labourers by occupation. Being fed from other 
sources, their wages are not settled by the price of subsistence. 
The female spinners in country villages probably do not earn 
the half of their necessary expenses, small as they are ; one is 
perhaps the mother, another the daughter, sister, aunt, or mo- 
ther-in-law of a labourer, who would probably support her, if 
she earned nothing for herself. Were she dependent for sub- 
sistence on her own earnings only, she must evidently double 
her prices, or die of want; in other words, her industry must 
be paid doubly, or would cease to exist. 

The same may be said of most kinds of work performed by 
females. They are in general but poorly paid, because a large 
proportion of them are supported by other resources than those 
of their own industry, and can, therefore, supply the work they 
are capable of at a cheaper rate, than even the bare satisfac- 
tion of their wants. The work of the monastic order is simi- 
larly circumstanced. It is fortunate for the actual labourers 
in those countries where monachism abounds, that it manfac- 
tures little else but trumpery ; for, if its industry were applied 
to works of current utility, the necessitous labourers in the 
same department, having families to suppf>rt, vv'ould be unable 
to work at so low a rate, and must absolutely perish by want 
and starvation. The wages of manufacturing, are often higher 
than those of agricultural labour ; but they are liable to the 
most calamitous oscillation. War or legislative prohibition will 
sometimes suddenly extinguish the demand for a particular pro- 
duct, and reduce the industry employed upon it to a state of 
utter destitution. The mere caprice of fashion is often fatal 
to whole classes. The substitution of shoe ribbands for buckles 
was a severe blow to the population of Sheffield and Birmingham.* 

The smallest variations in the price of rude and simple la- 
bour have ever been justly considered as serious calamities. In 
classes of somewhat superior wealth, and talents, which are, 
in fact, a species of personal wealth, a diminution in the rate 
of profits entails only a reduction of expense, or, at most, but 
trenches, in some measure, upon the capital those classes gene- 
rally have at their disposal. But to those, whose whole income 

* Malthus, Essay on Popul. ed. .5. b. iii. c. 13. 
45 



290 ON DISTRIBUTION. book ii. 

is a bare subsistence, a fall of wages is an absolute death-war- 
rant, if not to the labourer himself, to part of his family at least. 

Wherefore, all governments, pretending to the smallest pater- 
nal solicitude for their subjects' welfare, have evinced a readiness 
to aid the indigent class, wherever any unexpected event has 
accidentally reduced the wages of common labour below the level 
of the labourer's subsistence. Yet the benevolent intentions of 
the government have too often failed in their efficacy, for want of 
judgment in the choice of a remedy. To render it effective, it is 
necessary first to explore the cause of depression in the price of 
labour. If that depression be of a permanent nature, pecuniary 
and temporary aid is of no possible avail, and merely defers the 
pressure of the mischief. Of this nature are the discovery of new 
processes, the introduction of new articles of import, or the emi- 
gration of a considerable number of cfjnsumers. (a) In such 
emergencies, a remedy must be sought in the discovery of some 
new and permanent occupation for the hands thrown out of em- 
ploy, in the encouragement of new channels of industry, in the 
setting on foot of distant enterprises, the planting of colonies, &c. 

If the depression be not of a permanent nature, if it be the 
mere result of good or bad crops, the temporary assistance should 
be limited to the unfortunate sufferers by the oscillation. 

Governments or individuals, who attempt indiscriminate bpne- 
ficence, will have the frequent mortification of finding their 
bounty unavailing. This may be more convincingly demonstrated 
by example than by argument. 

Suppose in a vine district the quantity of casks to be so abun- 
dant, as to make it impossible to use them all. A war, or a sta- 
tute levelled against the production of wine, may, perhaps, have 
caused many proprietors of vineyards to adopt a different cultiva- 
tion of their lands ; this is a permanent cause of surplus cooper- 
age in the market. In ignorance of this cause, a general effort 
is made to assist the labouring coopers, either by purchasing 
their casks without wanting them, or by making up, in the shape 
of alms, the loss they have sustained in the diminution of their 
profits. Useless purchases, or eleemosynary aid, however, can 
not last for ever ; and, the moment they cease, the poor coopers 



(a) The second and last of these circumstances are neither of them ne- 
cessarily, universally, or permanently, followed by the depression of the rate 
t)f wages. When a new object of import does not supersede one of either 
home or foreign production, it must tend to raise tlie rate of wages, as it 
can only be procured by enlarged home production. The emigration of con- 
sumers, continuing to draw subsistence from the country they desert, leaves 
in activity an equal mass of human labour, though possibly with some va- 
riation of employment. Besides, it may be temporary only, as that of the 
English to the continent, and of the Irish both to England and to the con- 
tinent ; who possibly might be brought back by an improvement of domes- 
tic finance or of domestic security and comfort. T. 



CHAP. VII. ON DISTRIBUTION. 291 

will find themselves precisely in the same distressful situation, 
from which it was attempted to extricate them. All the sacrifices 
and expense will have been incurred with no advantage, other than 
that of a little delay in the date of their hopeless sufferings and 
privations. 

Suppose, on the contrary, the cause of the superabundance of 
casks to be but temporary; to be nothing more than the failure 
of the annual crop. If, instead of affording temporary relief to 
the working coopers, they be encouraged to remove to other dis- 
tricts, or to enter upon some other branch of industry, it will fol- 
low, that the next year, when wine may be abundant, there will 
be a scarcity of casks to receive it ; the price will become exor- 
bitant, and be settled at the suggestion of avarice and specula- 
tion; which being unable themselves to manufacture casks, 
after the means of producing them have been thus destroyed, 
part of the wine will probably be spoiled for want of casks to 
hold it. It will require a second shock and derangement of the 
rate of wages, before the manufacture of the article can be brought 
again to a level with the demand. 

Whence it is evident, that the remedy must be adapted to the 
particular cause of the mischief; consequently, the cause must 
be ascertained, before the remedy is devised. 

Necessary subsistence, then, may be taken to be the standard 
of the wages of common rough labour; but this standard is itself 
extremely fluctuating; for habit has great influence upon the 
extent of human wants. It is by no means certain, that the la- 
bourers of some cantons of France could exist under a total pri- 
vation of wine. In London, beer is considered indispensable; 
that beverage is there so much an article of necessity, that beg- 
gars ask for money to buy a pot of beer, (a) as commonly as in 
France for the purchase of a morsel of bread ; and this latter 
object of solicitation, which appears to us so very natural, may 
seem impertinent to foreigners just arrived from a country, 
where the poor subsist on potatoes, manioc, or other still coarser 
diet. 

What is necessary subsistence, depends, therefore, partly on 
the habits of the nation, to which the labourer may happen to be- 
long. In proportion as the value he consumes is small, his or- 
dinary wages may be low, and the product of his labour cheap. 
If his condition be improved, and his wages raised, either his 
product becomes dearer to the consumer, or the share of his fel- 
low producers is diminished. 

The disadvantages of their position are an effectual barrier 
against any great extension of the consumption of the labouring 
classes. Humanity, indeed, would rejoice to see them and their 



(a) The present depression of the labouring classes in England has low- 
ered the tone of mendicity, if indeed it ever was raised to so high a key. T. 



292 ON DISTRIBUTION. book ii. 

families dressed in clothing suitable to the climate and season; 
housed in roomy, warm, airy, and healthy habitations, and fed 
with wholesome and plentiful diet, with perhaps occasional deli- 
cacy and variety ; but there are very few counties, where wants, 
apparently so moderate, are not considered far beyond the limits 
of strict necessity, and therefore not to be gratified by the custo- 
mary wages of the mere labouring class. 

The limit of strict necessity varies, not only according to the 
more or less comfortable condition of the labourer and his fami- 
ly, but likewise according to the several items of expense reput- 
ed unavoidable in the country he inhabits. Among these is the 
one we have just adverted to; namely, the rearing of children; 
there are others less urgent and imperative in their nature, though 
equally enforced by feeling and natural sentiments; such as the 
care of the aged, to which unhappily the labouring class are far 
too inattentive. Nature could entrust the perpetuation of the 
human species to no impulse less strong, than the vehemence of 
appetite and desire, and the anxiety of paternal love; but has 
abandoned the aged, whom she no longer wants, to the slow 
workings of filial gratitude, or, what is even less to be depended 
upon, to the providence of their younger years. Did the habi- 
tual practice of society imperatively subject every family to the 
obligation of laying by some provision for age, as it commonly 
does for infancy, our ideas of necessity would be somewhat en- 
larged, and the minimum of wages somewhat raised. 

It must appear shocking to the eye of philanthropy, that such 
is not always the case. It is lamentable to think of the little pro- 
vidence of the labouring classes against the season of casual 
misfortune, infirmity, and sickness, as well as against the certain 
helplessness of old age. Such considerations afford most pow- 
erful reasons for forwarding and encouraging provident associa- 
tions of the labouring class, for the daily deposit of a trifling sav- 
ing, as a fund in reserve for that period, when age, or unexpect- 
ed calamity, shall cut off the resource of their industry.* But 

* Saving banks have succeeded in several districts of England, Holland, 
and Germany ; particular!}' where the government has been wise enough to 
withhold its interference. The Insurance Company of Paris has set one on 
foot upon the most liberable principles and with the most substantial gua- 
rantee. It is to be hoped, that the labouring classes in general will see the 
wisdom of placing their little savings in such an establishment, in prefer- 
ence to the hazardous investments they have often been decoyed into. 
There is besides a further national advantage in such a practice ; viz. that 
of augmenting the general mass of productive capital, and consequently ex- 
tending the demand for human agency. (1) 



(1) [In tlie principal cities of the United States, Saving Banks have also 
recently been established, and have been attended with so much benefit, 
that we expect soon to hear of their spreading through every part of the 
Union. To the Friendly or Beneficial Societies there are strong objections. 



CHAP. VII. ON DISTRIBUTION. 293 

such institutions can not be expected to succeed, unless the la- 
bourer be taught to consider these means of precaution as a mat- 
ter of duty and necessity, and hold to the obligation to carry his 
savings to such places of deposit, as equally indispensable with 
the payment of his rent or taxes : this new duty would doubtless 
tend in a slight degree to raise the scale of wages so as to allow 
of such frugality, but for that very reason it is desirable. How 
can such establishments thrive in countries where habit and the 
interested views of the government conspire to make the labour- 
er spend in the public-house not only what he might lay by, but 
frequently the very subsistence of his family, in which all his 
comforts and pleasures should be centered. The vain and cost- 
ly amusements of the rich are not always justifiable in the eye of 
reason ; but how much more disastrous is the senseless dissipa- 
tion of the poor! The mirth of the indigent is invariably season- 
ed with tears ; and the orgies of the populace are days of mourn- 
ing to the philosopher. 

Besides the reasons advanced in this and the preceding sec- 
tions, to explain why the wages of the adventurer, even if he de- 
rive no profit as a capitalist, are generally higher than those of 
the mere labourer, there are others, not so solid or well founded 
indeed, but such as nevertheless must not be overlooked. 

The wages of the labourer are a matter of adjustment and 
compact between the conflicting interests of master and work- 
to which the Saving Banks are not liable. Tlie Friendly Societies have, 
undoubtedly, done some gfood; but attended with a certain portion of evil. 
The following extract from a report of the Committee of the Highland So- 
ciety, places these latter societies in a very proper light. 

" During the last century, a number of Friendly Societies have been es- 
tablished by the labourers in different parts of Great Britain, to enable 
them to make provision against want. The principle of these societies usual- 
ly is, that the members pay a certain stated sum periodically, from which 
an allowance is made to them upon sickness or old age, and to their fami- 
lies upon their death. These societies have done much good; but they are 
attended with some disadvantages. In particular, the frequent meetings 
of the members occasion the loss of much time, and frequently of a good deal 
of money spent in entertainments : The stated payments must be regular- 
ly made ; otherwise, after a certain time, the member (necessarily from its 
being in fact an insurance) loses the benefit of all that he has formerly paid. 
Nothing more than the stated payments can be made, however easily the 
member might be able at the moment to add a little to his store. Fre- 
quently the value of the chances on which the societies are formed, is ill 
calculated; in which case either the contributors do not receive an equi- 
valent for their payments, or too large an allowance is given at first, which 
brings on the bankruptcy of the institution. Frequently the sums are em- 
bezzled by artful men, who, by imposing on the inexperience of the mem- 
bers, get themselves elected into offices of trust. The benefit is distant 
and contingent ; each member not having benefit from his contribiitions in 
every case, but only in the case of his falling into the situations of distress 
provided for by the society. And the whole concern is so complicated, that 
many have hesitation in embarking in it their hard earned savings."] 

American Editor. 



294 ON DISTRIBUTION. book ii. 

man; the latter endeavouring to get as much, the former to give 
as little, as he possibly can; but, in a contest of this kind, there 
is on the side of the master an advantage, over and above what 
is given him by the nature of his occupation. The master and 
the workman are no doubt equally necessary to each other; for 
one gains nothing but with the other's assistance; the wants of 
the master are, however, of the two, less urgent and less imme- 
diate. There are few masters but what could exist several 
months or even years, without employing a single labourer; and 
few labourers that can remain out of work for many weeks, 
without being reduced to the extremity of distress. And this 
circumstance must have its weight in striking the bargain for 
wages between them. 

Sismondi, in a late work* published since the appearance of 
my third edition, has suggested some legislative provisions, for 
the avowed purpose of bettering the condition of the labouring 
classes. He sets out with the position, that the low rate of their 
wages accrues to the benefit of the adventurers and masters who 
employ them; and thence infers, that, in the moment of calami- 
ty, their claim for relief is upon the masters, and not upon socie- 
ty at large. Wherefore, he proposes to make it obligatory upon 
the proprietors and farmers of land at all times to feed the agri- 
cultural, and upon the manufacturers to provide subsistence for 
the manufacturing labourer. On the other hand, to prevent the 
probable excess of population, consequent upon the certain pros- 
pect of subsistence to themselves and their families, he would give 
to their respective masters the right of preventing or permitting 
marriage amongst their people. 

This scheme, however entitled to favourable consideration by 
the motive of humanity in which it originated, seems to me alto- 
gether impracticable. It would be a gross violation of the right 
of property, to saddle one class of society with the compulsory 
maintenance of another; and it would be a violation still more 
gross, to give to one set of men a personal control over another; 
for the freedom of personal action is the most sacred of all the 
objects of property. The arbitrary prohibition of marriage to 
one class is a premium to the procreation of all the rest. Besides, 
there is no truth in the position, that the low rate of wages re- 
dounds exclusively to the profit of the master. Their reduction, 
followed up by the constant action of competition, is sure to bring 
about a fall of the price of products; so that it is the class of con- 
sumers, in other words, the whole community, that derives the 
profit. And if it be so great, as to throw the subsistence of the 
labourers upon the public at large, the public is in a great mea- 
sure indemnified by the reduced prices of the objects of its con- 
sumption. 

* Nouveaux Prin. d^Econ. Pol. liv. vii. c. 9. 



CHAP. VII. ON DISTRIBUTION. 295 

There are some evils incident to the imperfection of the hu- 
man species, and to the constitution of nature ; and of this de- 
scription is the excess of population above the means of subsis- 
tence. On the whole, this evil is quite as severely felt in a horde 
of savages, as in a civilized community. It would be unjust to 
suppose it a creature of social institutions, and a mere fallacy to 
hold out the prospect of a complete remedy; and, however it 
may merit the thanks of mankind to study the means of pallia- 
tion, we must be cautious not to give a ready ear to expedients 
that can have no good effect, and must prove worse than the dis- 
ease itself. A government ought doubtless to protect the inte- 
rests of the labouring classes, as far as it can do so without de- 
ranging the course of hurnan affairs, or cramping the freedom of 
individual dealings; for those classes are less advantageously 
placed than the masters, in the common course of things; but 
a wise ruler will studiously avoid all interference between indivi- 
duals, lest it superadd the evils of administration to those of na- 
tural position. Thus, he will equally protect the master and the 
labourer from the effects of combination. The masters have the 
advantage of smaller numbers and easier communication; where- 
as, the labourers can scarcely combine, without assuming the air 
of revolt and disaffection, which the police is ever on the watch 
to repress. Nay, the partisans of the exporting system have 
gone so far as to consider the combinations of the journeymen 
as injurious to national prosperity, because they tend to raise the 
price of the commodities destined for export, and thereby to in- 
jure their preference in the foreign market, which they look upon 
as so desirable. But what must be the character of that policy, 
which aims at national prosperity through the impoverishment of 
a large proportion of the home producers, with a view to supply 
foreigners at a cheaper rate, and give them all the benefit of the 
national privation and self-denial"? 

One sometimes meets with masters, who, in their anxiety to 
justify their avaricious practices by argument, assert roundly, 
that the labourer would perform less work, if better paid, and 
that he must be stimulated by the impulse of want. Smith, a 
writer of no small experience and sigular penetration, is of a 
very different opinion. Let us take his own words. " The libe- 
ral reward of labour, as it encourages the propagation, so it in- 
creases the industry of the common people. The wages of la- 
bour are the encouragement of industry, which, like every other 
human quality, improves in proportion to the encouragement it 
receives. A plentiful subsistence increases the bodily strength 
of the labourer, and the comfortable hope of bettering his condi- 
tion, and of ending his days perhaps in ease and plenty, animates 
him to exert that strength to the utmost. Where wages are high, 
accordingly, we shall always find the workmen more active, dili- 
gent, and expeditious, than where they are low; in England, for ex- 



295 ON DISTRIBUTION. book ii. 

ample, than Scotland; in the neighbourhood of great towns, than 
in remote country places. Some workmen, indeed, when they 
can earn in four days what will maintain them through the week, 
will be idle the other three. This, however, is by no means the 
case with the greater part. Workmen, on the contrary, when 
they are liberally paid by the piece, are very apt to overwork 
themselves, and to ruin their health and constitution in a few 
years 



"* 



SECTION V. 

Of the Independence accruing to the JSloderns from the Jldvance- 
ment of Industry. 

The rr>axims of political economy are immutable; ere yet ob- 
served or discovered, they were operating in the way above de- 
scribed; the same cause regularly producing the same effect; 
the wealth of Tyre and of Amsterdam originated in a common 
source. It is society that has been subject to change, in the pro- 
gressive advancement of industry. 

The ancients were not nearly so far behind the moderns in 
agriculture, as in the mechanical arts. Wherefore, since agri- 
cultural products are alone essential to the multiplication of 
mankind, the unoccupied surphis of human labour was larger 
than in modern days. Those, who happened to have little or no 
land, unable to subsist upon the product of their own industry, 
unprovided with capital, and too proud to engage in those subor- 
dinate employments, which were commonly filled by slaves, had 
no resource but to borrow, without a prospect of the ability to 
repay, and were continually demanding that equal division of 
properly, which was utterly impracticable. With a view to stifle 
their discontents, the leading men of the state were obliged to 
engage them in warlike enterprises, and, in the intervals of peace, 
to subsist them on the spoils of the enemy, or on their own pri- 
vate means. This was the grand source of the civil disorder and 
discord, which continually distracted the states of antiquity; of 
the frequency of their wars, of the corruption of their suffrages, 
and of the connexion of patron and client, which backed the am- 
bition of a Marius and a Sylla, a Pompey and a Ccesar, an An- 
tony and an Octavius, and which finally reduced the whole Ro- 
man people to the condition of servile attendants upon the court 
of a Caligula, a Heliogabalus or some monster of equal enormity, 
whose grand condition of empire was the subsistence of the ob- 
jects of his atrocious tyranny. 

The industrious cities of Tyre, Corinth, and Carthage, were 

* Wealth of Nations, book i. c. 8. 



CHAP. VII. ON DISTRIBUTION. 297 

somewhat differently circumstanced ; but they could not perma- 
nently resist the hostility of poorer and more warlike nations, 
impelled by the prospect of plunder. Industry and civilization 
were the continual prey of barbarism and penury ; and Rome 
herself, at length, yielded to the attack of Gothic and Vandalic 
conquerors. 

Thus replunged into a state of barbarism, the condition of Eu- 
rope, during the middle ages, was but a revival of the earliest 
scenes of Grecian and Italian history, in an aggravated form. 
Each baron, or great landholder, was surrounded by a circle of 
vassals or clients on his domain, ready to follow him in civil 
broils or foreign warfare. 

I should trench upon the province of the historian, were I to 
attempt the delineation of the various causes, that have aided the 
progress of industry since that period ; but I may be allowed 
merely to note, by the way, the great change that has been effect- 
ed, and the consequences of that change. Industry has become 
a means of subsistence to the bulk of the population, indepen- 
dent of the caprice of the large proprietors, and without being to 
them a constant source of alarm : it is nursed and supported by 
the capital accumulated by its own exertions. The relation of 
client and vassal has ceased to exist; and the poorest individual is 
his own master, and dependent upon his personal faculties alone. 
Nations can support themselves upon their internal resources ; and 
governments derive from their subjects those supplies, which 
they were wont to dispense as a matter of favour. 

The increasing prosperity of manufacture and commerce have 
raised them in the scale of estimation. The object of war is 
changed, from the spoliation and destruction of the sources of 
wealth, to their quiet and exclusive possession. For the last two 
centuries, where war has not been made to gratify the childish 
vanity of a nation or a monarch, the bone of contention has al- 
Vi'ays been, either colonial sovereignty, or commercial monopoly. 
Instead of a contest of hungry barbarians against their wealthy 
and industrious neighbours, it has been one between civilized na- 
tions on either side ; wherein the victor has shown the greatest 
anxiety to preserve the resources of the conquered territory. 
The invasion of Greece by the Turks, in the fifteenth century, 
appears to have been the final effort of pure barbarism arrayed 
against civilization, (a) The present preponderance of industry 
and civilized habits amongst the general mass of mankind seems 
to exclude all probability of a recurrence of such calamitous 



(a) That is to say in Europe ; for in Asia tlie contest is still continued ; 
and the late brilliant successes of the British arms in that quarter have been 
achieved by tiie spirit of order and civilization over that of anarchy and 
spoliation. T. 

46 



298 ON DISTRIBUTION. book ii. 

events. Indeed, the improvement of military science takes away 
all fear of the result of such a conflict. 

There is yet one step more to be made ; and that can only 
be rendered practicable by the wider diffusion of the princi- 
ples of pohtical economy. They will some day have taught 
mankind, that the sacrifice of their lives, in a contest for the 
acquisition or retention of colonial dominion or commercial mo- 
nopoly, is a vain pursuit of a costly and delusive good ; that 
external products, even those of the colonial dependencies of 
a nation, are only procurable with the products of domestic 
growth ; that internal production is, therefore, the proper ob- 
ject of solicitude, and is best to be promoted by political tran- 
quillity, moderate and equal laws, and facility of intercourse. 
The fate of nations will thenceforth hang no longer upon the 
precarious tenure of political pre-eminence, but upon the rela- 
tive degree of information and intelligence. Public function- 
aries will grow more and more dependent upon the productive 
classes, to whom they must look for supplies ; the people, re- 
taining the right of taxation in their own hands, will always be 
well governed ; and the struggles of power against the current 
of improvement will end in its own subversion ; for it will vainly 
strive against the dispensations of nature. 



CHAPTER VIII. 

OF THE REVENUE OP CAPITAL. 

The service, rendered by capital, in productive operations, 
establishes a demand for capital to be so employed, and en- 
ables the proprietors of it to charge more or less for that ser- 
vice. 

Whether the capitalist thus employ his capital himself, or lend 
it to another for that purpcse, it yields a profit, that is called 
the profit of capital, distinct from that of the industry employing 
it. In the former case, the profit obtained constitutes the 
revenue of his capital, which is added to that of his personal 
talent and industry, and often confounded with it. — In the lat- 
ter, the revenue of capital is precisely the interest paid for its 
use, the proprietor abandoning to the borrower the profit de- 
rivable from his personal employment of the capital lent. 

As the investigation of the interest of capital lent will help 
to throw light on the subject of the profit derivable from its 
personal employment, it may be as well, in the first instance, 
to acquire a just idea of the nature and variation of interest. 



CHAP. VIII. ON DISTRIBUTION. 299 

SECTION I. 

Of Loan at Interest. 

The interest of capital lent, improperly called the interest of 
money, was formerly denominated usury, that is to say, rent 
for its use and enjoyment; which, indeed, was the correct term ; 
for interest is nothing more than the price, or rent, paid for 
the enjoyment of an object of value. But the word has ac- 
quired an odious meaning, and now presents to the mind the 
idea of illegal, exorbitant interest only, a milder but less ex- 
pressive term having been substituted by common usage. 

Before the functions and utility of capital were known, it is 
probable, that the demand of rent for it by lenders was consi- 
dered an abuse and oppression, — an expedient to favour the rich 
and prejudice the poor ; nay, further, that frugality, the sole 
means of amassing capital, was regarded as parsimony, and 
deemed a public mischief by the populace, in whose eyes, the 
sums not spent by great proprietors were looked upon as lost to 
themselves. They could not comprehend, that money, laid by 
to be turned to account in some beneficial employment, must be 
equally spent ; for, if it were buried, it could never be turned to 
account at all ; that it is in fact, spent in a manner a thousand 
times more profitable to the poor 5* and that a labouring man is 
never sure of earning a subsistence, except where there is a ca- 
pital in reserve for him to work upon. This prejudice against 
rich individuals, who do not spend their whole income, still 
exists pretty generally ; formerly it was universal ; lenders them- 
selves were not altogether free from it, but were so much asham- 
ed of the part they were acting, as to employ the most disreput- 
able agents in the collection of profits perfectly just, and highly 
advantageous to society. 

It is, therefore, not surprising that the ecclesiastical, and at 
several periods, the civil code likewise, should have interdicted 
loans at interest; and that, during the whole of the middle ages, 
throughout the larger states of Europe, this traffic should have 
been reputed infamous, and abandoned to the Jews. — The little 
manufacturing or commercial industry of those days was kept 
alive by the scanty capital of the dealers and mechanics them- 
selves ; and agricultural industry, which was pursued with some- 
what better success, was supported by the advances of the lords 
and great proprietors, who employed their serfs or retainers on 
their own account. Loans were contracted for, not with a view 
of profitably employing the money, but merely to satisfy some 

* Vide infra. Book III. on the subject of reproductive consumption. 



300 ON DISTRIBUTION. book ii. 

urgent want, so that the exaction of interest was profiting by a 
neighbour's distress ; and it may easily be conceived, that a reh- 
gion, founded on the principle of fraternal love, as the Christian 
religion is, must disapprove a calculating spirit, that even now is 
a stranger to generous bosoms, and repugnant to the common 
maxims of morality. — Montesquieu* attributes the decline of 
commerce to this proscription of loans at interest; which was un- 
doubtedly one cause, although indeed, it was one amongst many. 

The progressive advance of industry has taught us to view the 
loan of capital in a different light. In ordinary cases, it is no 
longer a resource in the hour of emergency, but an agent, an in- 
strument, which may be turned to the great benefit, as well of 
society, as of the individual. Henceforward, it will be reckoned 
no more avaricious or immoral to take interest, than to receive 
rent for land, or wages for labour; it is an equitable compensation 
adjusted by mutual convenience ; and the contract, fixing the 
terms between borrower and lender, is of precisely the same na- 
ture, as any other contract whatsoever. 

In ordinary cases of exchange, however, the transaction is 
ended as soon as the exchange is completed; whereas, in the case 
of a loan, there remains to be calculated the risk the lender in- 
curs of never recovering the whole, or at least a part, of his capi- 
tal. This risk is practically estimated, and indemnified by some 
addition of interest, in the nature of a premium of insurance. 
Whenever there happens to be a question about the interest of 
advances, a careful distinction should be made between these, 
its two component parts ; otherwise, there is always danger of 
error; and individuals, or even the agents of public authority, will 
be apt to involve themselves in useless and disastrous operations. 
Thus, the practice of usury has been uniformly revived, when- 
ever it has been attempted to limit the rate of interest, or abolish 
it altogether. The severer the penalties, and the more rigid 
their exaction, the higher the interest of money was sure to rise; 
and this was what might naturally have been expected ; for the 
greater the risk, the greater premium of insurance did it require 
to tempt the lender. At Rome, while the republican form of go- 
vernment lasted, the interest of money was enormous, as it was 
natural to suppose, even if it were not a matter of history. The 
debtors, who are always the plebeians, were continually threaten- 
ing their patrician creditors. The laws of Mahomet have prohi- 
bited loan at interest ; and what is the consequence in the Mus- 
sulman dominions? Money is lent at interest, but the lender must 
be indemnified for the use of his capital, and, moreover, for the 
risk incurred in the contravention of the law. It was the same 
in Christian countries, so long as loan at interest was illegal ; 
and where the necessity of borrowing enforced the toleration of 

* Esprit des Lois, liv. xxi. c. 20. 



CHAP. VIII. ON DISTRIBUTION. 301 

the practice amongst the Jews, such were the humiliation, op- 
pression, and extortion, to which, on one pretext or another, that 
nation was exposed on this score, that nothing short of a very 
heavy rate of interest could indemnify for such repeated loss and 
mortification. Letters patent of the French king John, bearing 
date in the year 1360, are now extant, which authorizes the Jews 
to lend on pledges at the rate of 4 deniers per week for every livre 
of twenty sons, which is more than 86 per cent, per ann.; but, iri 
the year following, the same monarch, though recorded as one 
of the most scrupulous performers of his royal word that our 
annals can boast of, caused the quantity of pure metal contained 
in the coin to be reduced; so that the lenders no longer received 
back a value equal to what they had lent. 

This explanation will alone sujffice to justify the very heavy in- 
terest demanded, without at all taking into calculation, that, at a 
period, when loans were negotiated, not to forward industrious 
enterprises, but to support war, to feed extravagance, and to fur- 
ther the most hazardous projects ; at a period, when laws were 
powerless, and lenders unable legally to enforce their claims 
against their debtors, it required a very ample premium to cover 
the risk of non-payment. In fact, the premium of insurance ab- 
sorbed the far greater part of what passed under the name of in- 
terest, or usury : and the actual bond fide interest, the rent for the 
use of capital lent, was reduced to a very trifle ; for, though a 
capital was scarce, there is reason to suppose, that productive 
occupation was still more so. Of the 86 per cent, interest paid 
in the reign of king John, perhaps not more than 3 or 4 per cent, 
was the equivalent for the productive service of the capital ad- 
vanced : for all productive labour is better paid now, than it was 
in those days ; and even now a-days the rent of capital can scarce- 
ly be reckoned higher than 5 per cent.; the excess is so much 
premium of insurance for the lender's indemnity. 

Thus, the ratio of the premium of insurance, which frequently 
forms the greater portion of what is called interest, depends on 
the degree of security presented to the lender ; whTch security 
consists chiefly in three circumstances: — 1. The safety of the 
mode of employment ; 2. The personal ability and character of 
the borrower; 3. The good government of the country he hap- 
pens to reside in. We have just seen, how much the hazardous 
purposes, to which loans were applied in the middle ages, en- 
hanced the premium of insurance necessarily paid to the lender. 

It is the same with all perilous investments of capital, with a 
difference in degree only. The Athenians of old, made a dis- 
tinction between marine interest, or interest of capital afloat, and 
land interest, or interest on shore ; the former was rated at 30 
per cent., more or less, per voyage, whether to the Euxine, or to 
any port in the Mediterranean.* As two such voyages were ac- 

* Voyage d' Anacharsis, torn. iv. p. 371. 



302 ON DISTRIBUTION. book ii. 

complished with ease in the year, the annual marine interest may 
be rated at about 60, while other interest was commonly not more 
than 12 per cent. Supposing that, of the 12 per cent., one half 
was assigned to cover the risk of the lender ; we shall find, that 
the mere annual rent or hire of money at Athens, was 6 per cent, 
only, which I should still think above the mark; yet, supposing 
it to have been so high, the marine interest allowed 54 per cent, 
for insurance of the lender's risk. So enormous a premium must 
be attributed in part to the barbarous habits then prevalent among 
the nations with whom they traded ; for different nations were 
then much greater strangers to each other, than they are at pre- 
sent, and commercial laws and customs much less respected; and 
in part to the imperfections of the art of navigation. There was 
more danger in a voyage from the Pirajus to Trapezus, though 
but three hundred leagues distant, than there is now in one from 
L'Orient to China, which is a distance of seven thousand. Thus, 
the improvements of geography and navigation have contributed 
to lower the rate of interest, and ultimately to reduce the cost 
price of products. Loans are sometimes contracted, not for a 
productive investment, but for mere barren consumption. Trans- 
actions of this kind should always awaken the suspicion of the 
lender, inasmuch as they engender no means of re-payment of 
either principal or interest. If charged upon a growing revenue, 
they are, at all events, an anticipation of that revenue ; and if 
charged upon any of the sources of revenue, they afford the means 
of dissipating the particular source itself. If there be the secu- 
rity neither of revenue nor of its source, they barely place the 
property of one person at the wanton disposition of another. 

Among the circumstances incident to the nature of the employ- 
ment, which influence the rate of interest, the duration of the loan 
must not be forgotten; ceteris paribus, interest is lower when the 
lender can withdraw his funds at pleasure, or at least in a very 
short period ; and that both on account of the positive advantage 
of having capital readily at command, and because there is less 
dread of a risk, which may probably be avoided by timely retreat. 
The facility of immediate negotiation presented by the transferra- 
ble bills and notes of modern governments, is one principal cause 
of the low rate of interest, at which many of these governments 
are enabled to borrow, (a) This interest, in my opinion, hardly 
covers the risk o.f the lender ; but he always reckons on the cer- 



(a) This is strongly illustrated by the unfunded and the funded debt of 
Great Britain. The former in the shape of exchequer and treasury bills, 
bears a rate of interest considerably lower than the latter in the shape of 
stock ; because the bills are convertible readily at par ; whereas, the usual 
rise and fall of the capital stock is much greater, tlaan the interest upon it 
for short periods. T. 



CHAP. viii. ON DISTRIBUTION. 303 

tainty of selling his securities before the moment of catastrophe, 
should any serious alarm be entertained. The public securities 
that are not negotiable, bear a much higher interest ; such, for 
instance, as the old personal annuities in France, which the go- 
vernment generally sold at the rate of 10 per cent., a high ave- 
rage for young lives. Wherefore, the Genevese acted with ex- 
cellent judgment, in settling their annuities on thirty lives of well 
known public characters. By this means, they made their an- 
nuities negotiable, and so contrived to get the rate of interest of 
securities not negotiable, upon securitis that were negotiable. 

About the vast influence of personal character and ability in 
the borrower, in determining the amount of the premium of in- 
surance to the lender, there can be no doubt whatever: they are 
the basis of what is called personal credit; and it is hardly neces- 
sary to say, that a person in good credit borrows at a cheaper 
rate, than another who has none. 

Next to approved integrity and probity, what most contributes 
to the credit of an individual or of a government is, past punc- 
tuality in performance of engagements; this is, in fact, the very 
corner-stone of credit, and one that seldom proves insecure. 
But why, it may be asked, may not a man who has never yet 
made default in his payments, fail the very next moment? There 
is very little probability that he will, especially if his punctuahty 
be of long standing. For, to have been ever punctual in his pay- 
ments, he must either have always been possessed of value in 
hand sufficient to meet demands upon him; that is to say, he 
must have been a man of property over and above his debts, 
which is the best possible ground of trust; or else he must have 
managed matters so well, and have speculated with so much 
judgment and safety, as always to have had his returns arrive 
before the calls became due; thus evincing a degree of ability 
and prudence, which afford an excellent guarantee for his future 
punctuality. The converse of this is the reason, why a mer- 
chant, that has once failed or hesitated in the performance of his 
engagements, thenceforward loses his credit entirely. 

Finally, the good government of the country, where the debt- 
or resides, reduces the risk of the creditor, and, consequently, 
the premium of insurance he is obliged to demand to cover that 
risk. Hence it is, that the rate of interest rises, whenever the 
laws and their administration do not insure the performance of 
engagements. It is yet more aggravated, when they excite to 
the violation of them; as when they authorize non-payment, 
or do not acknowledge the validity o( bond fide contracts. 

The resort to personal restraint against insolvent debtors has 
been generally considered as injurious to the borrower; but is, 
on the contrary, much in his favour. Loans are made more wil- 
lingly, and on better terms, where the rights of the lender are 



304 ON DISTRIBUTION. book ii. 

best secured by law. (a) Besides, the encouragement to accu- 
mulate capital is thereby enlarged; wherever individuals mis- 
trust the mode of investing their savings, there is a strong in- 
ducement to every one to consume the whole of his income, and 
this consideration will, perhaps, help to explain a curious moral 
phenomenon; namely, that irresistible avidity for excessive en- 
joyment, which is a common symptom in times of political tur- 
bulence and confusion.* 

However, while on the subject of the necessity of personal se- 
verity towards debtors, I can not recommend the practice of im- 
prisonment; to confine a debtor is to command him to discharge 
his debts, and at the same time deprive him of the means of so 
doing. There seems more reason in the Hindu institution, giv- 
ing the creditor the option of seizing the person of his insolvent 
debtor, and confining him at the creditor's own home to compul- 
sory labour, for the creditor's benefit.| — But, whatever be the 
means, whereby the public authority enforces the payment of 
debts, they must always be ineffective, if law be partially or ca- 
priciously administered. The moment a debtor is, or hopes to 
be, out of his creditor's reach, there is a risk to be run by the 
creditor, which is of value, and must be indemnified. 

After having thus detached from the rate of bare interest all 
that is paid as premium of insurance to the lender against the 
risk of total or partial loss of his capital, it remains to consider 
that part, which is purely and simply interest; that is to say, rent 
paid for the utility and the use of capital. 

Now this portion of the gross sum called interest is larger, in 
proportion as the supply of capital available for loans is less; 
and as the demand of capital for that specific object is greater; 
and again, that demand is the greater in proportion to the more . 

* See the description of the plague at Florence, as given after Boccacio 
by Sismondi, in his admirable Histoire des Republiques d''Italie. A similar 
effect was observed at several of the most dreadful epochs of the French 
revolution. 

t Raynal, Histoire Philosophique, torn. i. 



(a) The personal restraint of the debtor has no where been carried to 
such extreme length as in England. Not only was a debtor at one time 
liable to imprisonment pendente lite, and before the debt was legally estab- 
lished, and that for the smallest sum ; but the term of his imprisonment in 
execution after judgment was absolutely unlimited. The hardship, in both 
these particulars, was partially remedied before the erection of our insol- 
vent code ; and that code has still further alleviated the condition of the 
debtor. But the whole system is vitiated, and in a great measure, neutral- 
ized, by total neglect of all measures for the prevention of insolvency, in 
limine. The grand expedient is, publicity of property ; which, m the first 
place, gives the creditor the means of estimating beforehand, and with 
more accuracy, the grounds and fair extent of his debtor's creclit; and in 
the next, enables him, in case of default, to resort to those means, instead of 
endeavouring to discover or extort them by personal restraint. Thus it is, 
that one error of policy is sure to engender another. T. 



CHAP. viii. ON DISTRIBUTION. 305 

numerous and more lucrative employments of capital. Conse- 
quently, a rise in the rate of interest does not infallibly or uni- 
versally denote, that capital is grown scarcer; for, possibly, it 
may be a sign, that its uses are multiplied. Smith has remarked 
this consequence upon the close of the very successful war on 
the part of England, which terminated with the peace of 1763.* 
The rate of interest then advanced instead of declining; the impor- 
tant acquisitions of England had opened a new field for her com- 
mercial enterprise and speculation; capital was not diminished in 
quantity, but the demand for it was increased; and the rise of in- 
terest, which ensued, though, in most cases a sign of impoverish- 
ment, was, in this, a consequence of the acquisition of new 
sources of wealth. 

France, in 1812, experienced the opposite effect of a cause 
directly the reverse. A long and destructive war, which had an- 
nihilated almost all external communication; exorbitant taxation ; 
the ruinous system of licenses; the commercial enterprises of 
the government itself; frequent and arbitrary alterations in the 
duties on import; confiscation, destruction, vexation; in fine, 
a system of administration uniformly avaricious and hostile to 
private interest, had rendered all enterprises of industry difficult, 
hazardous, and ruinous in the extreme. The aggregate capital 
of the nation was probably on the decline ; but the beneficial em- 
ployment of it became still more rare as well as dangerous ; so 
much so, that interest never fell so low in France as at that pe- 
riod ; and, what is in general the sign of extreme prosperity, was 
then the effect of extreme distress. 

These exceptions serve but to confirm the general and eter- 
nal law, that the more abundant is the disposable capital, in pro- 
portion to the multiplicity of its employments, the lower will the 
interest of borrowed capital fall. With regard to the supply of 
disposable capital, that must depend on the quantum of previous 
savings. On this head, I must refer to what I have before said 
upon the subject of the formation of capital. | 

* Wealth of Nations, book i. c. 9. 

t Supra, Book I. chap. 11. It has been remarked, that the rate of inte- 
rest is usually somewhat lower in towns, than in country places. Wealth 
of Nations, book i. c. 9. The reason is plain. Capital is for the most part 
in the hands of the wealthy residents of the towns, or at least of persons 
who resort to tliem for their business, and carry with them the commodity 
they deal in, i. e. capital, which they do not like to employ at much dis- 
tance from their own inspection. Towns, and particularly great cities, are 
the grand markets for capital, perhaps even more than for labour itself; ac- 
cordingly, labour is there comparatively dearer than capital. In the country, 
where there is little unemployed capital, the contrary is observable. Thus, 
usury is more prevalent in country places; it would be less so, if the busi- 
ness of lending were more safe and in better repute, (a) 



(a) These remarks are just in the main ; but the advantage of town over 
country, in this particular, may be reduced to a very trifle, by the ease of 

47 



306 ON DISTRIBUTION. book n. 

If it be desired, that capital in search of employment, and in- 
dustry in search of capital, should both be satisfied in the fullest 
manner, entire liberty of dealing must be allowed in all matters 
touching loan at interest. Disposable capital, being thus left to 
itself, will seldom remain long unemployed ; and there is every 
reason to believe, that as much industry will be called into acti- 
vity, as the actual state of society will admit. 

But it is essential to pay a strict attention to the meaning of 
the term, supply of disposable capital ^ for this alone can have 
any influence upon the rate of interest; it is only so much capi- 
tal, as the owners have both the power and the will to dispose of, 
that can be said to be in circulation. A capital, already vest- 
ed and engaged in production or otherwise^ is no longer in the 
market, and therefore no longer forms a part of the total circu- 
lating capital; its owner is no longer a competitor of other own- 
ers in the business of lending, unless the employment be one, 
from which capital may be easily disengaged and transferred to 
other objects. Thus, capital lent to a trader, and liable to be 
withdrawn from his hands at short notice, and, a fortiori, capital 
employed in the discount of bills of exchange, which is one way 
of lending among commercial men, is capital readily disposable 
and transferable to any other channel of employment, which the 
owner rpay judge convenient. 

Capital employed by the owner on his own account, in a trade 
that may be soon wound up, in that of a grocer for instance, 
stands nearly in the same predicament. The articles he deals in 
finds at all times a ready market: and the capital thus employ- 
ed, may be realized, repaid if lent, re-lent and re-employed in 
other trades, or appUed to any other use. It is always either in 
actual circulation, or at least on the point of being so. Of all 
values, the one most immediately disposable is that of money. 
But capital embarked in the construction of a mill, or other fa- 
bric, or even in a moveable of small dimensions, is fixed capital, 
which, being no longer available for any other purpose, is with- 
drawn, from the mass of circulating capital, and can no longer 
yield any other benefit, than that of the product wherein it has 
been vested. Nor should it be lost sight of, that, even though 
the mill or other fabric be sold, its value, as capital, is not by 
that means restored to circulation; it has merely passed from one 
proprietor to another. On the other hand, the disposable value, 
wherewith the buyer has made the purchase, is not thrown out 
of circulation, having merely passed from his into the seller's 
hands. The sale neither increases nor diminishes the mass of 
floating capital in the market. Attention to this circumstance is 



internal communication. In England the difference is scarcely percepti- 
We. T. 



CHAP. vm. ON DISTRIBUTION. 307 

essential to the forming a correct estimate of the causes, that de- 
termine the rate, as well of interest on capital, as likewise of pro- 
fit accruing from capital employed, which we are about to consi- 
der presently. 

It has been sometimes supposed, that capital is multiplied by 
the operation of credit. This error, though frequently recurring 
in works professing to treat of political economy, can only arise 
from a total ignorance of the nature and functions of capital. 
Capital consists of positive value vested in material substance, 
and not of immaterial products, which are utterly incapable of 
being accumulated. And a material product evidently can not 
be in more places than one, or be employed by more persons 
than one, at the same identical moment. The works, machinery, 
utensils, provisions, and stock in hand, composing the capital of 
a manufacturer, may possibly be wholly borrowed ; in which 
case, he will be acting upon a hired capital, and not on one of 
his own : yet, beyond all question that capital can be made use 
of by no one else, so long as it remains within his control and 
management : the lender has parted with the power of otherwise 
disposing of it for the time. A hundred others might have equal 
security and credit to offer ; but their applications could not mul- 
tiply the volume of disposable capital, and could have no other 
effect than to prevent other capital from remaining idle and out 
of employ.* 

It is not to be expected, that I should here enter upon a com- 
putation of the motives of affection, consanguinity, generosity, 
or gratitude, which may occasionally give rise to the loan of 
capital, or influence the amount of interest demanded for it. 
Every reader must take upon himself to appreciate the influence 
of moral causes upon the laws of political economy, which alone 
we profess to expound. 

To limit capitalists to the lending at a certain fixed rate only, 
is to set an arbitrary value on their commodity, to impose a maxi- 
mum of price upon it, and to exclude, from the mass of floating 

* Vide suprd, Book I. chap. 10, 11, on the mode of employing, and on 
the transformation and accumulation of capital. What is here said does 
not militate against the positions laid down in Book I. chap. 22. on the 
representatives of money. A bill of exchange, with good names upon it, is 
only an expedient for borrowing of a third person actual and positive value, 
in the interim between the negotiation and the maturity of the bill. Bills 
and notes, payable on demand, or at sight, whether issued by the govern- 
ment, or by private banking-establishments are a mere substitution of a 
cheap paper-agent of circulation, in the place of a costly and metallic agent. 
The monetary functions of the metal being executed by the paper, the 
former is set free for other objects ; and, inasmuch as it is exchangeable for 
other commodities or implements of industry, a positive accession is made 
by the substitution to the natural capital ; but no further. The degree of the 
accession is limited strictly to the amount of value required for the business 
of circulation, and dispensed with by this expedient ; which amount is a 
mere trifle, in comparison with the total value of the national capital. 



308 ON DISTRIBUTION. book ii. 

or circulating capital, all that portion, whose proprietors can not, 
or will not, accept of the limited rate of interest. Laws of this 
description are so mischievous, that it is well they are so little 
regarded as they almost always are, the wants of borrowers com- 
bining with those of lenders, for the purpose of evading them ; 
which is easily managed, by stipulating for benefits to the lender, 
not indeed bearing the name of interest, although really the 
same thing in the end. The only consequence of such enact- 
ments is, to raise the rate of interest, by adding to the risks, to 
which the lender is exposed, and against which he must be in- 
demnified. It is somewhat amusing to find that those govern- 
ments, which have fixed the rate of interest, have almost invari- 
ably themselves set the example of breaking their own laws, by 
borrowing at higher than legal interest in their own case. 

That interest should be fixed by law, is highly proper and ne- 
cessary ; but it should be fixed only in cases, where there is no 
previous agreement about it ; as in the case of a legal recovery 
of a sum with interest. And, in such case, I think the interest 
fixed by law should be estimated at the lowest rate, that is usu- 
ally paid by individuals ; because the lowest rate is that paid by 
the safest investments. Now, it is quite consistent with justice, 
that the witHholder of capital should restore it even with interest; 
but that is in the supposition, that it has remained all the while 
in his possession ; which it can not be supposed to have done, 
without his having invested it in the way the least hazardous, 
and consequently without his having drawn from it at least the 
lowest interest it would have afforded. 

But this rate should not be denominated the legal interest, be- 
cause the rate of interest ought no more to be restricted, or 
determined by law, than the rate of exchange, or the price of 
wine, linen, or any other commodity. And this is the proper 
place to expose a very prevalent error. 

Capital, at the moment of lending, commonly assumes the 
form of money ; whence it has been inferred, that abundance of 
money is the same thing as abundance of capital ; and, conse- 
quently, that abundance of money is what lowers the rate of in- 
terest. Hence the erroneous expressions used by men of busi- 
ness, when they tell us, that money is scarce, or that money is 
plentiful; which, it must be confessed, are equally just and ap- 
propriate, as the very incorrect term, interest of money. The 
fact is, that abundance or scarcity of money, or of its substitute, 
whatever it may be, no more affects the rate of interest, than 
abundance orscarcity of cinnamon, of wheat, or of silk. Thearticle 
lent is not any commodity in particular, or even money, which is 
itself but a commodity, like all others ; but it is a value accu- 
mulated and destined to beneficial investment. 

A man, who is about to lend, converts into money the aggre- 
gate value he means to devote to that particular purpose; and the 



CHAP. VIII. ON DISTRIBUTION. 309 

borrower no sooner has it at command, than he exchanges it for 
something else, the money that has effected this operation, pro- 
ceeds forthwith to effect another similar or dissimilar one, God 
knoivs ichat ; the payment of a tax perhaps, or subsidy of an ar- 
my. The value lent has assumed but for a moment the form of 
money, in the same manner, as we have traced revenue received 
and spent, to pass through the same temporary form, the identi- 
cal pieces of money serving perhaps a hundred times in the course 
of a year, to transfer equivalent portions of income. '^So, like- 
wise, the same sum of money, that has served to transfer a value 
from the hands of one lender into those of a borrower, may, af- 
ter infinite intervening transfers, perform the like office between 
a second borrower and lender, without stripping the former bor- 
rower of any part of the value he has received. In reality, then, 
it is value which has been borrowed, and not any particular sort 
of metal or of merchandise. AH kinds of merchandise may be 
lent and borrowed, as well as money ; nor does the rate of inter- 
est at all depend upon the quality of the object lent or borrowed. 
Nothing is more common in trade, than to lend and borrow other 
objects than money. When a manufacturer buys the raw mate- 
rial of his business at a certain credit, he, in fact, borrows the 
wool, or cotton, as the case may be, making use of the value of 
those materials in his concern ; and their quality has no influ- 
ence on the interest, with which he credits the seller.* The 
glut or scarcity of the commodity lent only affects its relative 
price to other commodities, and has no influence whatever on 
the rate of interest upon its advance or loan. Thus, when silver 
money lost three-fourths of its former relative value, although 
four times as much of it was necessary to pass a loan of the 
same extent of capital, the ratio of interest remained unaltered. 

* Many loans on interest are made without bearing that name, and with- 
out implying a transfer of money. When a retail dealer supplies his shop 
by buying of the manufacturer or wholesale dealer, he borrows at interest, 
and repays, either at a certain term, or before it, retaining the discount, 
which is but the return of the interest charged him in addition to the price 
of the goods. When a provincial dealer makes a remittance to a banker 
at Paris, and afterwards draws upon his banker, he lends to him, during 
the time that elapses between the arrival of the remittance and the pay- 
ment of the draft. The interest of this advance is allowed in the interest 
account attached by the banker to the merchant's account-current. In the 
Cours di'Economie Politique compiled by StorcTi, for the instruction of the 
young grand-dukes of Russia, and printed at Petersburgh, tom. vi. p. 103, 
we are informed, that the English merchants, or factors settled in Russia, 
sell to their customers at a credit of twelve months ; which enables the Rus- 
sian purchaser of current articles, to realize long before the day of payment, 
and turn the proceeds to account in the interim ; thereby operating with 
English capital, never intended to be so employed. It is to be presumed, 
that the English indemnify themselves for this loss of interest, by the addi- 
tional price of their goods. But the average rate of profit upon capital in 
Russia is so high, that even this round-about way of borrowing is sufficiently 
profitable to the native dealers. 



310 ON DISTRIBUTION. book n. 

The quantity of specie or money, in the market, might increase 
ten-fold, without multiplying the quantity of disposable, or circu- 
lating capital.* 

Wherefore, it is a great abuse of words, to talk of the interest 
of money ; and probably this erroneous expression has led to 
the false inference, that the abundance or scarcity of money re- 
gulates the rate of interest. "j" Law, Montesquieu, nay even the 
judicious Locke, in a work expressly treating of the means of 
lowering ftie interest of money, have all fallen into this mistake ; 
and it is no wonder that others should have been misled by their 
authority. The theory of interest was wrapped in utter obscu- 
rity, until Hume and SmithJ dispelled the vapour. Nor will it 
ever be clearly comprehended, except by such as shall have ac- 
quired a correct notion of what has, throughout this work, been 
denominated capital, and shall proceed in the conviction, that the 
object lent or borrowed, is not a particular commodity or object 
of merchandise, but a portion of value, — of the aggregate value 
of the capital available for that object ; and that the per centage 
paid for the use of this portion of capital, at all times and places, 
depends on the relative supply and demand of capital to be lent, 
and is wholly independent of the specific form or quality of the 
commodity, wherein the loan is made, whether it be money, or 
any other article whatever. 

* This is no contradiction to the former position, that the precious me- 
tals form part of the capital of society. They form an item of capital, but 
not of disposable, or lendable capital ; for they are already employed, and 
not in search of employment ; — employed in the business of circulating va- 
lue from one hand to another. If their supply exceed the demand for this 
object, they are sent to other parts, where their price continues higher ; if 
their general abundance lower their price every where, the sum of their 
value is not increased, but a larger quantity of them is given in exchange 
for the same value in other commodities. 

t If interest were always low in proportion to the greater supply of mo- 
ney, it would be lower in Portugal, Brazil, and the West Indies, than in 
Germany, Switzerland, &lc. which is by no means the case. 

t Essays of D. Hume, part ii. ess. 4. Wealth of Nations, book ii. c. 4. 
It is well for the student in political economy, that Locke and Montesquieu 
have not written more upon it ; for the talent and ingenuity of a writer serve 
only to perplex a subject he is not thoroughly acquainted with. To say the 
truth, a man of lively wit can not satisfy his own mind without a degree of 
speciousness and plausibility, which is of all things the most dangerous to 
the generality of readers, who are not sufficiently grounded in principle to 
discover an error at first sight. In those sciences, which consist in mere 
compilation and classification, as in botany or natural history, one can 
scarcely read too much; but in those dependent upon the deduction of 
general laws from particular facts, the better course is to read little, and 
select that little with judgment. 



CHAP. viii. ON DISTRIBUTION. 311 

SECTION II. 

Of the Profits of Capital. 

We have now sufficiently considered the nature and motive of 
the interest paid by the borrower to the lender of capital, and, 
though it appears pretty plainly, that this interest is compounded 
of the rent of the capital, and of the premium of insurance against 
the risk of its partial or total loss, we have also seen enough, to 
comprehend the extreme difficulty of severing and distinguishing 
these two ingredients. 

Let us then proceed,, in the next place, to investigate the causes 
of the profit derivable from the employment of capital, whether 
by a borrower or by the proprietor himself: to which end it will 
be necessary, in the outset, to sever it from the profit of the in- 
dustry, that turns it to account ; and here again we shall meet 
with the greatest difficulty, in drawing the line of distinction ; 
though it is easy to perceive, that these two classes of profit, ge- 
nerally speaking, are combined in the recompense or portion of 
the adventurer. Smith, and most of the English writers on this 
science, have omitted to notice this distinction ; they comprise 
under the general head of the profit of capital, or stock, as they 
term it, many items, which evidently belong to the head of the 
profit of industry.* 

Perhaps an approximation may be made to the accurate ap- 
preciation of that part of the aggregate profit, which appertains 
to the capital, and that, which appertains to the industry em- 
ploying it, respectively, by comparing the mean ratio of total 
profit with the mean ratio of the difference of profit in the same 

* This omisson is justified by Smith, on the following' grounds. "Let us 
suppose," says he, "that in some particular place, where the common annual 
profits of manufacturing stock are 10 per cent., there are two different ma- 
nufactures, in one of which the coarse' materials annually wrought up cost 
only 700Z., while the finer materials in the other cost 7000L If the labour 
in each cost 300L per annum, the capital employed in the one will amount 
only to lOOOZ.; whereas, that employed in the other will amount to 7300Z. 
At the rate of 10 per cent., therefore, the undertaker of the one will expect 
a yearly profit of lOOL only, and that of the other 730Z.;" and he goes on to 
infer, " that the profit is in proportion to the capital, and not to the labour 
and skill of inspection and direction." But the instance put is altogether 
inconclusive : and it is equally easy to suppose the case of two manufactures, 
carried on in the same place, and in the same line, each with an equal capi- 
tal of lOOOZ.; the one under the conduct of an active, frugal, and intelligent 
manager, the other under that of an idle, ignorant, and extravagant one ; 
the former yielding a profit of 150Z. per annum, the latter one of oOZ. only. 
The difference in this case will arise, not from any difference in the respec- 
tive capitals employed, but from the difference in the skill and industry 
employing them ; which latter qualities will be more productive in the one 
instance than in the other. 



312 ON DISTRIBUTION. bookii. 

line of business, which seems a fair index of the difference of 
the skill and labour engaged. We will suppose two houses, in 
the fur trade for example, to work each upon a capital of 
100,000 /r., and to make on the average, an annual profit, the 
one of 24,000 fr., the other of 6,000 fr. only; a difference of 
18,000 fr., fairly referable to the different degree of skill and 
labour, the mean of which is 9000 /r.; this may be considered 
as the gains of industry, which, deducted from 15,000 fr., the 
mean profit of the trade, will leave 6000 /r. for the profit of the 
capital embarked in it. 

This example I could suggest as a means, rather of distin- 
guishing those items of profit thus mixed up together, than of 
estimating their respective ratio with any tolerable certainty. 
But, without any index to the precise line of demarkation be- 
tween the profits of capital and those of the industry employ- 
ing it, we may take it for granted, that the former will always 
be proportionate to the risk of partial or total loss, and to the 
duration of the employment. In practice, adventurers, having 
capital at their command, always weigh before hand the ad- 
vantages and disadvantages of the different modes of invest- 
ment, as specified above,* and naturally prefer, ceteris paribus, 
those presenting the smallest risk and the quickest return ; so that 
there is less competition of capital for hazardous and long-winded 
adventurers ; indeed, none whatever is embarked in them, unless 
they hold out a rate of profit so much above the average rate, as 
to tempt the capitalist to run the risk. Theory, therefore, leads 
to the presumption, which is confirmed by the test of experience, 
that the profit of capital is high, in proportion to the hazard of the 
adventure, and to the length of its duration. 

When a particular employment of capital, the trade with 
China for instance, does not afford a profit proportionate, not only 
to the time of the detention, but likewise to the danger of loss, 
and the inconvenience of a long, perhaps a two years' duration 
of one single operation before the returns come to hand, a pro- 
portion of the capital is gradually withdrawn from that channel ; 
the competition slackens, and the profits advance, until they rise 
high enough to attract fresh capital.'f 

This will serve also to explain, why the profits, derivable from 
a new mode of employment, are larger than those of common 
and ordinary employments, where the production and consump- 
tion have been well understood for years. In the former case, 

* Book II, chap. 7. sect. 3. 

t To say nothing of the other motives, that attract industry towards any 
particular profession or repel it thence, which have been noticed in the 
preceding chapter. These motives sometimes operate all in the same di- 
rection, and then the profits of both industry and capital rise or fall toge- 
ther ; when they act in opposite directions, the difference on the profit of 
capital balances that on the profit of industry ; or vice ver$d. 



CHAP. VIII. ON DISTRIBUTION. 313 

competition is deterred by the uncertainty of success ; in the lat- 
ter, allured by the security of the employment. 

In short, in this matter, as in all others, where the interests of 
mankind clash one with another, the ratio is determined by the 
relative demand and supply for each mode of employment of ca- 
pital respectively. 

It is a maxim with Smith and those of his school, that human 
labour was the first price, — the original purchase-money, paid 
for all things. They have omitted to add, that, for every object 
of purchase, there is, moreover, paid, the agency and co-opera- 
tion of the capital employed in its production. Is not capital 
itself, they will say, composed of accumulated products, — of ac- 
cumulated labour? Granted : but the value of capital, like that of 
land, is distinguishable from the value of its productive agency ; 
the value of a field is quite different from that of its annual rent. 
When a capital of 1000 fr. is lent, or rather let on hire, for a 
■year, in consideration of bO fr. more or less, its agency is trans- 
ferred for that space of time, and for that consideration ; besides 
the 50 fr. the lender receives back the whole principal sum of 
1000 fr., which is applicable to the same objects as before. 
Thus, although the capital be itself a pre-existent product, the 
annual profit upon it is an entirely new one, and has no reference 
to the industry, wherein the capital originated. 

Wherefore, when a product is ultimately completed by the aid 
of capital, one portion of its value must go to recompense the 
agency of the capital, as well as another to reward that of the in- 
dustry, that have concurred in its production. And the portion 
so applied is wholly distinct from the value of the capital itself, 
which is returned to the full amount, and emerges in a perfect 
state from its productive employment. Nor does this profit upon 
capital represent any part of the industry engaged in its original 
formation. 

From all which it is impossible to avoid drawing this conclu- 
sion, that the profit of capital, like that of land and the other 
natural sources, is the equivalent given for a productive service, 
which, though distinct from that of human industry, is neverthe- 
less its efficient ally in the production of wealth. 



SECTION III. 

Of the Employments of Capital most beneficial to Society. 

To the capitalist himself, the most advantageous employment 
of capital is that, which with equal risk yields the largest profit ; 
but what is to him most beneficial, may perhaps not be so to the 
community at large ; for capital has this peculiar faculty, that, 
besides being productive of a revenue peculiar to itself, it is, 

4S 



314 ON DISTRIBUTION. book ir. 

moreover, a means, whereby land and industry may generate a 
revenue likewise. This is an exception to the general principle, 
that what is the most productive to the individual, is so to the 
community at large. A capital lent to a foreign country may 
very probably produce to the proprietors and the nation the high- 
est possible rate of interest; but can afford no assistance towards 
extending the revenue of the national territory, or for the nation- 
al industry, as it would do, if employed within the pale of the na- 
tion. 

The portion of capital embarked in domestic agriculture is em- 
ployed best for the interests of a nation; it enhances the produc- 
tive power of the land and of the labour of a country. It aug- 
ments at once the profits of industry and those of real property. 
Capital, employed under intelligent direction, may make barren 
rocks to bear increase. The Cevennes, the Pyrenees, and the 
Pays de Vaud, present on every side the view of mountains, once 
a scene of unvaried sterility, now covered with verdure and en- 
riched by cultivation. Parts of these rocks have been blasted 
with gunpowder, and the shivered fragments employed in the 
construction of terraces one above another, supporting a thin 
stratum of earth carried thither by human labour. In this man- 
ner is the barren surface of the rock transformed into shelving 
platforms, richly furnished with verdure, and teeming with pro- 
duce and population. The capital originally expended in these 
laborious improvements might, perhaps, have produced larger 
profits to the capitalist, if employed in external commerce ; but 
probably the total revenue of the district would have been inferior 
in amount. 

For a similar reason, capital can not be more beneficially em- 
ployed, than in strengthening and aiding the productive powers 
of nature. Well contrived and useful machinery produces more 
than the interest of its prime cost; and, besides affording addi- 
tional profit to the proprietor, benefits the consumer and the 
community at large, to the full extent of the saving effected by 
its means ; for every thing saved is so much gain. 

The productive employments, that rank next in point of na- 
tional benefit, are those of manufacture and interiaal commerce; 
for the profits of the industry they set in motion are earned at 
home ; whereas, capital embarked in foreign trade benefits the 
industry and natural resources of all nations indiscriminately. 

The employment of capital, that tends least to the national ad- 
vantage, is the carrying trade between one foreign country and 
another. 

When a nation is possessed of an immense accumulation of 
capital, it will do well to embark it in all these different channels 
of industry; for they are all lucrative, and in nearly equal degree 
to the capitalist, though in very different degrees to the nation at 
large. What prejudice can arise to the lands of Holland, which 



CHAP. vm. ON DISTRIBUTION. 315 

are already in a high state of cultivation and management, and 
want neither cleuring nor enclosing, or what injury be sustained 
by nations possessed of little territory, like the old states of Ve- 
nice, Genoa, and Hamburgh, from the large investments of na- 
tional capital in the carrying trade 1 It flowed into that particu- 
lar channel of employment, merely because there was no other 
open to it. But that class of trade, and generally all external 
commerce, is ill adapted to a nation de^cient in capital, and hav- 
ing not enough to keep its agriculture and manufacture in acti- 
vity; and it would be absurd for its government to give premature 
encouragement to those external branches of iridustry ; for such 
a measure would but check the employment of capital in the 
manner best calculated to increase the national revenue. China, 
though it is the largest empire in the world, and must possess the 
greatest aggregate revenue, since it maintains the most numerous 
and dense population, abandons to foreigners almost all its exter- 
nal commerce. Undoubtedly, in her present condition, she 
would be a gainer by extending her external relations of com- 
merce ; but she affords a very striking example of the prosperity 
attainable without them. 

It is very fortunate, that the natural course of things impels 
capital rather into those channels, which are the most beneficial 
to the community, than into those, which afiord the largest ratio 
of profit. The investments generally preferred are those that are 
nearest home ; whereof the first and foremost is the improve- 
ment of the soil, which is justly considered the most safe and 
permanent; the next, manufacture and internal commerce ; and 
the last of all, external commerce, the trade of transport, and the 
commerce with distant nations. The owner of a capital, espe- 
cially of a moderate one, will embark it rather under his own su- 
perintendence, than in distant and remote concerns. He is apt 
to think his risk too hazardous, when he loses sight of his pro- 
perty for any considerable length of time, when he consigns it to 
strangers, or can expect only tardy returns, or is exposed to the 
chances of litigation with fraudulent debtors, who may take ad- 
vantage of their unsettled habits of life, or of the laws of foreign 
countries, with which he is himself unacquainted. Nothing, but 
the bait of exclusive privilege and monopoly-profit, or the violent 
derangement of internal industry, can induce an European na- 
tion, not possessed of a large surplus capital, to engage in the 
colonial or East India trade. (1) 



(1) [The reasoning of this whole section, appears to me, to be unsound 
and inconclusive. There is no distinction, in point of productiveness, be- 
tween any of the various employments of capital. There can, in short, be 
no line drawn between the different productive channels, into which capi- 
tal may be directed. .Whatever occupations tend to supply the wants and 
increase the comforts and accommodations of life, are, in the strictest sense 



316 ON DISTRIBUTION. book ik 



OF THE REVENUE OF LAND. 

SECTION I. 

Of the Profit of Landed Property.* 

Land has the facuhy of transforming and adapting to the use 
of mankind an infinity of substances, which, without its interven- 
tion, would be to them of no service; it yields nutriment and ve- 
getative juices to the grain, the fruits, and vegetables, whereon 
we subsist ; as well as to the forests, whereof we construct our 
houses, ships, and furniture, and whence we derive fuel to keep 
us warm. Its agency in the production of all these commodities 

* In the preceding chapter, I have given the interest, precedence of the 
profit, of capital, because the former helps to render the latter more intel- 
ligible. I have here adopted a contrary arrangement, because the conside- 
ration of the profit of land elucidates the subject of rent. 

of the v/ord, equally productive, and nearly, in the same proportion aug- 
ment the national wealth. The capital employed in the carrying trade be- 
tween one foreign country and another is as advantageous to the individual 
and nation to which it belongs, as the capital employed at home. For, as 
has been already remarked in relation to the profits of industry (vide note 
page 6) in the absence of all restraints, the profits of all the different em- 
ployments of capital, will be on an equality or nearly approaching it, in as 
much as any material difference will cause its diversion to a more produc- 
tive channel, and thus restore the- equilibrium. In a word, capital flows 
into tlie carrying trade only because it yields a greater profit than it other- 
wise would do, did it not take that direction. 

Moreover, there is no exception to the general principle, that what is 
most productive to the individual is so to the community at large. Not- 
withstanding our author's assertion to the contrary, in the foregoing sec- 
tion, a capital lent to, or employed in, a foreign country, if it produce to the 
proprietors and nation the highest rate of interest, must necessarily extend 
the national revenue as much, and afford the same assistance to the nation- 
al industry, as if it were employed within the pale of the nation. If, for 
example, the capital lent abroad, give employment to foreign industry and 
natural agents, it is because the same productive powers at home, when 
things, I must again repeat, are left to take their natural course, are alrea- 
dy more profitably employed. Were not this the case, this capital would 
not seek emplo3'ment abroad, but remain at home. The revenue produced 
by capital employed abroad, if the proprietor does not himself at the same 
time emigrate there, must be the means of calling into activity, and giving 
a greater development to the productive faculties of the national industry 
and land, as this revenue miist be consumed, eitiier productively or unpro- 
ductively at home.] American Editor. 



CHAP. IX. ON DISTRIBUTION. 317 

may be called, the productive service of land. And thence it is, 
that the profit of the proprietor originates. 

He derives a further benefit frem the useful substances to be 
extracted from its entrails ; the stone, metal, coal, peat, &c. &c. 

Land, as we have above remarked, is not the only natural 
agent possessing productive properties ; but it is the only one, or 
almost the only one, which man has been able to appropriate, 
and turn to his own peculiar and exclusive benefit. The water 
of rivers and of the ocean has the power of giving motion to ma- 
chinery, affords a means of navigation, and supply of fish ; it is 
therefore, undoubtedly possessed of productive power. The 
wind turns our mill; even the heat of the sun co-operates with 
human industry; but happily no man has yet been able to say, 
the wind and the sun's rays are mine, and I will be paid for their 
productive services. I would not be understood to insinuate, 
that land should be no more the object of property, than the rays 
of the sun, or blast of the wind. There is an essential differ- 
ence between these sources of production; the power of the lat- 
ter is inexhaustible; the benefit derived from them by one man 
does not hinder another from deriving equal advantage. The 
sea and the wind can at the same time convey my neighbour's 
vessel and my own. With land it is otherwise. Capital and 
industry will be expended upon it in vain, if all are equally privi- 
leged to make use of it; and no one will be fool enough to make 
the outlay, unless assured of reaping the benefit. Nay, para- 
doxical as it may seem at first sight, it is, nevertheless, perfect- 
ly true, that the man, who is himself no share-holder of land, is 
equally interested in its appropriation with the share-holder him- 
self. The savage tribes of New Zealand, and of the north-west- 
ern coast of America, where the land i^ unappropriated, have the 
greatest difficulty in procuring a precarious subsistence upon fish 
and game, and are often reduced to devour worms, caterpillars, 
and the most nauseous vermin:* not unfrequently even to wage 
war on one another, from absolute want, and to devour their pri- 
soners as food; whereas, in Europe, where the appropriation is 
complete, the meanest individual, with bodily health, and incli- 
nation to work, is sure of shelter, clothing, and subsistence, at 
the least. 

In preceding chapters, we have noticed the |)rbfit resulting 
from industry and capital, embarked in agriculture or other 
branches of industry. In the present, we are to inquire, where- 
in consists the pecuHar profit of land itself, independent of that 
accruing from the industry and capital, devoted to its cultivation; 
and to consider the profit of land in the abstract, and whence it 

* Malthus, in his Essay on Population, book i. c. 405, has given a detail 
of some of the revolting extremes, to which savage tribes have been redu^ 
ced, by the want of a regular supply of food. 



318 ON DISTRIBUTION. book ir. 

originates, without any inquiry as to who may be the cultivator, 
whether the proprietor himself, or a tenant under him. 

It is the declared opinion of many writers,* that the value of 
products is never more than the recompense of the human agen- 
cy engaged in their production; consequently, that there is no 
residue or surplus, that can be set apart as the peculiar profit of 
land, and constitute the rent paid for its use to the proprietor. 
The tenor of their argument is this: the proprietor of land lying 
waste or fallow, having also a capital to dispose of, may, at his 
pleasure, expend it, either in cultivation, or in some other way. 
If he reckons that the cultivation of his land will yield him as 
large a return as any other investment, he will give it the pre- 
ference; and, indeed, it is found by experience, that this mode 
of investment is preferred, even though somewhat less advanta- 
geous than others, as being at all events more safe. Well : and 
what do they infer from this? Why, that cultivation yields no 

* Desiutt de Tracy. Commentaire sur VEsprit de Lois, c. 13. Ricardo, (a) 
Prin, of Pol. Econ. and Tax. c. 2. 



(a) This chapter of Ricardo is perhaps the least satisfactory and intelli- 
gible of his whole work. It goes upon the principle detailed by Malthus, 
in his Essay on Rent; viz. that the ratio of rent is determined by the dif- 
ference in the product of land of different qualities, the worst land in culti- 
vation yielding no rent at all. But there is a great deal of land yielding 
rent without any cultivation; and, in a country, where the whole of the 
land is appropriated, none is ever cultivated without paying some rent or 
other. The downs of Wiltshire yield a rent, without any labour, or capi- 
tal, being expended upon them: so likewise the forests of Norway ; this 
rent is the natural product of the soil; it is paid for the perception of that 
natural product, between which, and the desire for it, an artificial difficulty 
is interposed by human appropriation. The vs^hole rent is, therefore, refer- 
able not to the quality of the land only, but to the quality jointly with the 
appropriation; and so it is in all cases. Wherever a difficulty is thus in- 
terposed, rent will be paid upon all land brought into cultivation; for why 
should the proprietor part with the temporary possession for nothing, any 
more than the capitalist with his capital ? And the ratio of rent is deter- 
mined, not altogether by the quality of the soil, but by the intensity — 1. of 
the desire, or demand for its productive agency; 2. of the artificial difficul- 
ty interposed by nature and human appropriation. The quality of the soil 
may vary the intensity of the demand for it beyond all question; for the 
quality is the productive agency : but the supply of agricultural industry 
and capital in the market will also vary the proportion of its product, which 
industry and capital will expect for themselves. Why is rent highest, when 
a population is condensed on a limited territorial surface? because then the 
utility of its productive qualities is more strongly felt and desired, in con- 
sequence of the intense difficulty of their attainment. And why is rent still 
further raised by the prohibition of the import of products of external agri- 
culture ? Because the natural difficulty of obtaining the benefit of the pro- 
ductive agency of foreign land is aggravated, by the artificial difficulty in- 
terposed by legislative enactments. The degree of productive agency, of 
course affects the amount of the product; but rent originates in the union 
of that agency, or utility, with difficulty of attainment, natural and artifi- 
cial, and is regulated in its ratio by their combined intensity. T. 



CHAP. IX. ON DISTRIBUTION. 319 

return whatever, beyond the interest of the capital engaged in 
it ;* and if so, what is there left for tlie profit of the productive 
powers of the soin Evidently nothing whatever. I have endea- 
voured to put the argument in the clearest and most intelligible 
light ; and I have to observe upon it, that it proceeds upon a 
partial and imperfect view of the matter, and upon a total ne- 
glect of the influence of demand in the fixation of value. 1 will 
now adventure a complete view of the subject. 

The productive power of the soil has no value, unless where 
its products are objects of demand. Travellers, who have ex- 
plored the interior of America, and other desert parts of the 
globe, make repeated mention of tracts of the richest land, capa- 
ble of every kind of culture, yet wholly destitute of any useful or 
valuable products. But, no sooner is a colony established in the 
vicinity, or, by some means or other, a market found, where the 
products of the soil will, in the way of exchange, pay the usual 
rate of interest upon the requisite advances, than cultivation be- 
gins immediately. Up to this point, there is no difference between 
us. But, if any circumstances operate to aggravate the demand 
beyond this point, the value of agricultural products will exceed, 
and sometimes very greatly exceed, the ordinary rate of interest 
upon capital; and this excess it is, which constitutes the profit of 
land, and enables the actual cultivator, when not himself the pro- 
prietor, to pay a rent to the proprietor, after having first retained 
the full interest upon his own advances, and the full recompense 
of his own industry. 

Land is an agent gratuitously furnished to mankind at large, 
by whom it is afterwards exclusively appropriated ; but its appro- 
priation does not begin to be profitable to the individual, in whose 
favour it is made, until its products are an object of demand, and 
until their supply ceases to be co-extensive with the desire for 
them, as it is with respect to some other natural objects, air, wa- 
ter, &c. 

From those products of the soil only, thus raised in value by 
the demand, can there accrue that profit to the proprietor, which 
has been called the profit of land ; and which is paid in all civil- 
ized countries, and especially where manufacture and commerce 
multiply the objects of exchange. It may sometimes happen, that, 
in a particular districi of such a country, the rent of land may be 
very trifling ; as in our own district of Sologne, where it is no 
more than ifr. the arpent; but this is owing to the want of roads, 
and particularly of water-carriage, which makes the charge of 
bringing its agricultural produce to market, added to the charge 
of cultivation, absorb nearly the whole value it will there sell for. 

In some countries, highly civilized and productive in the ex- 

* According to these writers, even the interest of capital is not given as 
the recompense of its concurrence in the business of production. I have 
already exposed the fallacy of this opinion, suprd. Chap. 8, sect. 2, 



320 ON DISTRIBUTION. book ii. 

treme, land pays no more than 3 or 4 per cent, upon its price or 
purchase-money. Yet, this is no proof of the poverty of the soil; 
it proves only, that it sells dear. A landed estate may yield 120 
fr. the arpent, and require very little expense of cultivation; as if 
it be laid down in pasture, for instance ; in such case, it must 
owe most of its value to its natural properties; yet, if it have cost 
the proprietor 4000 /r. the arpent, it will yield a return of 3 per 
cent. only. And herein consists the difference between the pro- 
Jit and the rent of land : profit is high or low, according to the 
quantum of the product ; rent, according to the quantum of the 
purchase-money or price. — An acre of land, yielding a profit of 
1 fr, only, will bring as high a rent as an acre yielding a profit 
of 50 fr., if 60 times as much has been paid for the one as for 
the other. 

Whenever land is bought with capita], or capital with land, Oc- 
casion is given for a comparison of the returns of the one species 
of property with the returns of the other. It is possible, that an 
estate, bought with a capital of 100,000 /r., may produce but 3 
or 4000yj\ per annum, whilst the same amount of capital would 
yield 5 or 6000/r. The lower rate of interest, which the pro- 
prietor is content to take on a purchase of land, may be attribut- 
ed, in the first place, to the superior stability of the investment. 
Capital can seldom be made productive, without undergoing seve- 
ral changes both of form and of place, the risk of which is always 
more or less alarming to persons unaccustomed to the operations 
of industry; whereas, on the contrary, landed property produces 
without any change of either quality or position. The satisfac- 
tion and pleasure attached to territorial possession, the consider- 
ation, weight, and dignity it communicates^ and the titles and pri- 
vileges with which it is in some countries accompanied, contri- 
bute greatly to increase this natural preference. 

It is true, that land is more exposed than other property to Jhe 
burden of public taxation, and to the arbitrary exactions of pow- 
er, precisely because it can neither be removed nor concealed. 
A floating capital may take any shape whatever, and be removed 
at will. It can escape tyranny and civil commotions more readi- 
ly, than even the person of its proprietor. It is a safer object of 
property; for it is often impossible to attach it, or to make it spe- 
cifically responsible for the debts of the proprietor. Moreover, 
it is much less exposed to litigation, than landed property. Yet, 
it is clear, that all these advantages are more than counterpoised 
by the superior risk of investment; and, that landed property is 
still preferred to floating capital ; since land is dearer, in propor- 
tion to its annual returns. 

Whatever may be the exchangeable price of land and capital , 
one to the other, it is proper to observe, that their interchange 
makes ho variation in the supply of productive agency of land 
and capital respectively in circulation, and disposable for the pur- 



CHAP. IX. ON DISTRIBUTION. 321 

poses of pvodiicfion ; consequently, that exchangeable price can 
nowise affect the real and positive profit of land and of capital. 
When Richard sells his estate to Thomas, the productive ser- 
vice of the land is at the disposal of Thomas instead of Richard; 
and that of the capital, given in exchange for it, is at the dispo- 
sal of Richard instead of Thomas. 

The only thing, which really varies the amount of productive 
agency of land in circulation, is the actual amelioration of the soil, 
by clearing and bringing new land into cultivation, or enlarging 
the productive powers of old land, and thus increasing its pro- 
duct. Savings and accumulations of capital are, in the shape of 
agricultural improvements, transformed into landed property, and 
made to participate in all the peculiar advantages and disadvan- 
tages attached to it. The same may be said of houses, and ge- 
nerally of all capital invested in a fixed and permanent object; it 
thenceforth loses the character of capital, and assumes that of 
landed property. 

Whence we may draw this invariable maxim ; that the produc- 
tive agency of land is possessed of value, which value, like va- 
lue in general, increases in the direct ratio of the demand, and 
the inverse ratio of the supply; and that, since land differs as 
much in quality, as in site and position, there is a peculiar de- 
mand and supply for each peculiar quality. A demand for so 
much wine, more or less, whatever it arise from, creates a speci- 
fic demand t'or as much productive agency of the soil, as may be 
requisite for its growth;* and the extent of surface, adapted to 
the culture of the grape, determines the supply of that productive 
service. If the soil, capable of growing good wine, be very li- 
mited in extent, and the demand for such wine very brisk, the 
profit of the soil itself will be extravagantly high. 

It is worthy of remark, that all land, that yields any profit at 
all, however trifling in amount, even so little as 1 fr. the arpent, 
or even less, may be kept in a state of cultivation: and there 
have been many instances of its cultivation under such circum- 
stances. Herein it differs from capital and industry. A labour- 
er, if he finds himself settled in a place, where his labour does 
not yield him what he has reason to expect, can migrate to ano- 
ther. So, likewise, capital quickly flows from a channel, that 
affords a less, to one that affords a greater return. But land has 
not the same facilities: it is of necessity immoveable ; conse- 
quently, out of its gross product, after the deduction in the first 
instance of all advances of capital, with interest, as well as of the 
profits of industry, without which there could be no product 
whatever, there still remains to be deducted the expense of car- 
rying the product to the market, or place of exchange. When 

* As well as a demand for the capital and industry requisite for the cul- 
tivation. 

49 



322 ON DISTRIBUTION. book ii. 

these several deductions absorb the whole product of the land, 
the land itself yields no profit at all, and the proprietor can never 
succeed in getting a rent from it. Even if he cultivate himself, 
he can only gain a profit on his capital and industry, but will re- 
ceive none whatever from the bare ownership of the land. In 
Scotland, there are tracts of unproductive land thus cultivated by 
the proprietors, which it would not answer for any one else to 
undertake. So, likewise, in the back settlements of the United 
States, there are tracts of great extent and fertility, whose reve- 
nue alone would not maintain the proprietors; yet they are, ne- 
vertiieless, cultivated with success; but it is by the proprietors 
themselves, who consume the product at the place of growth, 
and are obliged to superadd to the profit of the land, which is 
little or nothing, the further profit of capital and personal indus- 
try, which afford a handsome competency. 

It is obvious, that land, though in a state of cultivation, yields 
no profit, when no farmer will pay rent for it, which is a convinc- 
ing proof that it gives no surplus, after allowing for the profit of 
the capital and industry requisite for its cultivation. 

In the instance just mentioned, the effect is occasioned by the 
distance of the market; the expense of transport swallows up the 
profit, which might otherwise be made of the land. Other in- 
stances might be adduced, in which badness of seasons, war, or 
taxation, have produced the same effect, and partially or totally 
absorbed the profit of land, and thus thrown it out of cultivation.* 



SECTION II. 

Of Rent. 

When a fanner takes a lease of land, he pays to the pro- 
prietor the profit accruing from its productive agency, and re- 
serves to himself, besides the wages of his own industry, the 
profit upon the capital he embarks in the concern; which capital 
consists in implements of husbandry, carts, cattle, &c. He is 
an adventurer in the business of agricultural industry; and, 
amongst the means he has to work with, there is one that does 
not belong to him, and for which he pays rent, i. e. the land. 

The preceding section was occupied in explaining the source 
of the profit of land. Its rent is generally fixed at the highest 
rate of that profit, and for the following reason. 

* This catalogue of adverse circumstances, all hearing more strongly 
upon the profit of land, than upon that of other sources of revenue, explains 
the frequent and unavoidable remission of rent to the farmer, and proves 
the accuracy of M. de Sevigne's judgment, when she writes from the coun- 
try: — "I wish my son could come here and convince himself of the fallacy 
of fancying oneself possessed of wealth, when one is only possessed of land." 
Lettre 224. 



CHAP. IX. ON DISTRIBUTION. 323 

Agricultural adventure requires, on the average, a smaller ca- 
pital, (a) in proportion, than other classes of industry, reckoning 
the land itself as no part of the capital of the adventurer. Where- 
fore, there is a greater number of persons able, from their pecu- 
niary circumstances, to embark in agricultural, than in any other 
speculations; consequently, a greater competition of bidders for 
land upon lease. On the other hand, the quantity of land fit for 
cultivation is limited in all countries; whereas, the quantity of 
capital and the number of cultivators have no assignable limita- 
tion. Landed proprietors, therefore, at least in those countries 
which have been long peopled and cultivated, are enabled to en- 
force a kind of monopoly against the farmers. The demand for 
their commodity, land, may go on continually increasing; but 
the quantity of it can never beextended. 

This circumstance is equally applicable to the nation at large, 
and to each particular province or district. The number of acres 
to be rented in each province is incapable of extension; whilst 
the number of persons in a condition to rent them has no fixed 
and absolute limit. 

Whenever this is the case, the bargain between the land-hold- 
er and the tenant must always be greatly in favour of the former; 
and, whenever there is any portion of the soil, which yields to 
the latter more than the interest of his capital and the wages of 
his industry, a higher bidder will soon offer himself. The libe- 
rality of a few proprietors, the distance at which they happen to 
reside, the ignorance of others, and even of the farmers them- 
selves, and the imprudence of a few more, may sometimes ope- 
rate to depress the ratio of rent below the maximum of profit; 
but these are accidental circumstances, which act for a season 
only, and can never prevent the regular and constant action of 
natural causes, which must in the end prevail. 

Besides this advantage accruing to the land-holder, derived 
from the very nature of things, he has likewise in general the 
advantage of possessing, or being able to accumulate greater 
wealth, and sometimes credit, patronage, and influence, into the 
bargain: but the first advantage is alone sufficient to insure him 
the sole benefit of any circumstances, that may happen to en- 
hance the profit of land. The opening of a canal or road, the 
increase of population, wealth, and affluence in the province, al- 
ways operate to raise his rent. He also benefits by every im- 
provement in the cultivation: for a man can afford to pay dearer 
for the hire of an instrument, when he knows how to turn it to 
better account. 



(a) This is not universally true. In England, where agriculture has at- 
tained a high degree of perfection, arable farms require much larger capi- 
tals than formerly ; and a farnier is commonly a much richer man, than the 
majority of the tradesmen in his neighbourhood. T. 



324 ON DISTRIBUTION. book u. 

When the proprietor himself expends a capital in the improve- 
ment of his land, in draining, irrigation, fences, buildings, houses, 
or other erections, the rent then includes, in addition to the pro- 
fit of the land, the interest likewise of Ihe capital so expended.* 

The farmer may sometimes undertake these expenses of ame- 
lioration himself; but he can only calculate on receiving interest 
on the outlay during the continuance of his lease: at the expira- 
tion of which, the benefit tnust devolve to the land-holder, being 
wholly incapable of removal: thenceforward the landlord derives 
the whole profit, without having made any of the advances: for 
he receives a proportionate increase of rent in consequence. 
The farmer should, therefore, engage only in those improve- 
ments, whose effects will last no longer than his lease ; unless 
the lease belong enough, to allow the profit arising from his 
improvements to repay the whole outlay, together with the inte- 
rest. It is in this way, that long leases operate to increase the 
product of the land; and it is evident the effect will be the great- 
est, when the land is farmed by the proprietor himself; for he is 
far less likely, than the farmer, to lose the benefit of such ad- 
vances; every judicious improvement yields him a permanent 
profit, and the original outlay is amply repaid, when the land is 
finally disposed of. The farmer's certainty of reaping the ad- 
vantage till the end of his lease is equally conducive to the im- 
provement of landed property with the length of leases. On the 
contrary, such laws and customs, as authorize the cancelling of 
leases in specified cases, as in case of sale by the proprietor, are 
highly judicial to agriculture ; since the farmer will hardly ven- 
ture to undertake any considerable improvement, if kept in con- 
tinual fear of seeing an intrusive successor appropriate the re- 
compense of his ingenuity, labour, and capital. In fact, every 
improvement he should make would but increase the risk of that 
injustice; for land is far more saleable in good condition than 
otherwise. 

Leases are no where more sacredly regarded than in Eng- 
land; and the privilege, enjoyed by lessees to the amount of 40s., 
(about 50 fr.) and upwards, of voting at.Parliamentry (a) elec- 
tions, has, in some measure, restored the equipoise of power and 
influence between landlords and tenants, which seldom exist in 

* The capital, vested in improvements upon land, is sometimes of great- 
er value than the land itself. This is the case with dwelling-houses. 



(a) It is singular, that our author should have persevered in this mistake ; 
especially as the work of his countryman, Cottu, gave him the opportunity 
of correcting it in the fourth edition. The right of voting is confined ex- 
clusively to the proprietor, and is not extended even to all classes of proper- 
ty: freehold alone confers the right, and not copyhold or leasehold of any 
kind. T. 



CHAP. IX. ON DISTRIBUTION. 325 

practice. In no other country do we see tenants so confident of 
undisturbed possession, as to build upon ground held on lease. 
Such tenants improve the land, as if it were their own; and their 
landlords are punctually paid; which is less frequently the case 
elsewhere. 

The land is sometimes cultivated by persons possessed of no 
capital whatever, the proprietor furnishing himself the requisite 
capital, as well as the land. They are called in France metayers, 
and commonly pay to the landlord half the gross product. This 
arrangement is to be met with only in the infancy of agriculture, 
and is of all others the least conducive to improvement ; for the 
party, who bears the expense of amelioration, whether landlord 
or tenant, makes the other a gratuitous present of half the inte- 
rest on his advances. This kind of tendency was more common 
in the feudal times, than it is at present. The lords were above 
tilling the land themselves, and their vassals had not the means. 
The largest incomes were then derived from land, because the 
lords were large proprietors ; but they bore no proportion to the 
extent of the land. Nor was this owing to the. defect of agricul- 
tural skill, so much as to the scarcity of capital devoted to im- 
provements. The lord felt little anxiety to improve his pro- 
perty, and expended, in a way more liberal than productive, 
an income that he might easily have tripled. He levied war, 
gave feasts and tournaments, and maintained a numerous re- 
tinue. If we look at the then degraded condition of commerce 
and manufacture, superadded to the insecurity of the agricul- 
tural interest, we need go no further for the explanation of 
the reason, why the bulk of the community was in the extreme 
of indigence ; and why, independently of every political cause, 
the nation itself was weak and impotent. Five departments 
would not be able to repel attacks, which overwhelmed all 
France at that period : but, happily for her, the other states 
of Europe were nowise in a better condition. 



CHAPTER X. 

OF THE EFFECT OF REVENUE DERIVED BY ONE NATION FROM 
ANOTHER. 

One nation can not take from another the revenues of its 
industry. A German tailor, establishing himself in France, there 
makes a profit, in which Germany has no participation. But, 
if this tailor contrive to amass a little capital, and after the 
lapse of several years carry it back with him to his native coun- 
try, he injures France to the same extent as a French capi- 



326 ON DISTRIBUTION. book ii. 

talist, who should emigrate with the same amount of fortune.* 
In a poHtical view, the injury to the wealth of the nation is 
equal in both cases ; but, in a moral light, it is otherwise : for 
I reckon that a native Frenchman, in quitting his country, robs 
it of an affectionate attachment, and a spirit of exclusive na- 
tionality which it can never look for in a stranger born. 

A nation, receiving a stray child into its bosom again, ac- 
quires a real treasure ; inasmuch, as in him it receives an ad- 
dition to its population, an accession to the profits of national 
industry, and an acquisition of capital. It at the same time reco- 
vers a lost citizen, and the means for him to subsist upon. If 
the exile bring back his industry only, at any rate the profits of 
industry are added to the national stock. It is true, that 
a source of consumption is likewise superadded ; but supposing 
it to counterbalance the advantage, there is no diminution of 
revenue, while the moral and political strength of the country 
is actually augmented, (a) 

With regard to capital lent by one nation to another, the 
effect upon their respective wealth is precisely analogous to that, 
resulting from every loan from one individual to another. If 
France borrow capital from Holland, and devote it to a pro- 
ductive purpose, she will gain the profit of industry and land 
accruing from the employment of that capital ; and she will do 
so even although she pay interest; in like manner as a merchant 
or manufacturer borrows for the purposes of his concern, and 
gains a residue of profit, even after paying the interest of the 
loan. 

But, if one state borrow from another, not for productive pur- 
poses, but for those of mere expenditure, the capital borrowed 
will then yield no return, and the national revenue be saddled 
with the interest to the foreign creditor. Such was the con- 
dition of France, when she borrowed from the Genoese, the 
Dutch, and the Genevese, for the support of her wars, or to 
feed the prodigality of a court. Yet it was better to borrow 

* If, however, this capital be the fruit of his personal frugality, he robs 
France of no part of her wealth existing , previous to his arrival. Had he 
continued resident there, the aggregate of the capital of France would have 
been increased to the full extent of his accumulation ; but, in taking the 
whole away with him he takes no more than his own earnings, and no value 
but what is of his own creation ; in so doing, he commits no individual, and, 
therefore, no national wrong. 



(«) In the common course of things, such an addition is a national bene- 
fit, because it is an accession to the secondary source of production, i, e. in- 
dustry. But defective human institutions may convert a benefit into a curse ; 
as where a poor-law system gives gratuitous subsistence to a part of the 
population, capable of labour, but not incited by want. In such case, every 
additional human being may be a burthen instead of a prize ; for he may be 
one more on the list of idle pensioners. T. 



CHAP. X. ON DISTRIBUTION. 327 

from strangers than from natives, even for the purpose of dis- 
sipation ; because the amount so borrowed, was not withdrawn 
from the national productive capital of France. In either case, 
the French people would liave to pay the interest;* but had 
they likewise lent the capital, they would have had to pay the in- 
terest, and at the same time have lost the benefit, which their 
industry and land might have derived from its employment and 
agency. 

With regard to such landed property, as may belong to fo- 
reigners residing abroad, -the revenue arising from it is an item 
of foreign, and forms no part of the national revenue. But it 
is to be remembered, that the foreigner can not have purchas- 
ed it without a remittance of capital equal in value to the land ; 
which capital is an equally valuable acquisition, particularly if 
the nation be possessed of improveable land' in abundance, but 
of little capital to set industry in motion. In making his purchase 
of land, the foreigner exchanges a revenue of capital, which he 
leaves the nation to profit by, for a revenue of land : which he 
thenceforth receives ; thus bartering interest of money for rent 
of land. If the national industry be active and skilfully directed, 
more benefit may be derived from the interest, than was before 
obtained from the rent ; the purchaser, however, requires a fixed 
and permanent property, in lieu of one more perishable, transfer- 
able, and destructible. Mismanagement may soon annihilate the 
capital the nation has acquired ; but the land remains a perma- 
nent possession of the purchaser, and he m{iy sell it and get back 
the value when he pleases. There is therefore nothing to be 
apprehended from the purchase of land by foreigners, provided 
there be wisdom enough, to employ in reproduction the value re- 
ceived in exchange. 

The particular form, in which one nation may draw revenue 
from another, is of no importance whatever. It may be remitted 
in specie, in bullion, or in any other kind of merchandise: indeed 
it is of the greatest consequence to leave individuals to take it 
in the shape, that best suits their convenience ; for what suits them 
will infallibly be the best for both nations ; in like manner as in 
the conduct of international trade, the commodity, which indivi- 
duals export or import in preference, is that which best suits the 
mutual national interests. 

The agents of the English East India Company draw from that 
country, either an annual revenue, or an accumulated fortune, 
which they return to England to enjoy and live upon : they take 
good care not to withdraw these remittances in the shape of gold 
or silver, because the precious metals are of more relative value 
in xisia than in Europe ; they remit in the shape of India goods 
and products, on which a fresh profit is made on arrival in Eu- 

* It will be shown in Book III,, that the interest is equally lost, whether 
spent internally or externally. 



328 ON DISTRIBUTION. book ir. 

rope : every million they remit, swells perhaps to as much as 
1,200,000, by the time it has reached the place of destination. 
Thus, Europe gains to the amount of 1,200,000, while India loses 
only a million. If these despoilers of India* («) insisted on trans- 
mitting this whole sum in specie, they must rob Hindustan, per- 
haps, of 1,500,000, or upwards for every 1,200,000, that England 
would receive. The sum may, perhaps, be amassed originally 
in specie ; but it is always remitted in the shape of that commo- 
dity, which, for the time being, answers best as an object of trans- 
port. As long as exportation of any kind is allowed, and ex- 
portation has always been regarded by statesmen with a favour- 
able eye,' it is easy to receive in our country, the revenue and 
capital derived from another. And the remittance can not be 
prevented by the government, without the interdiction of all ex- 
ternal commerce, which after all would leave the resource of 
smuggling and contraband. In the eyes of political economy, 
nothing is more absurd, than to see governments prohibit the ex- 
port of the national specie, as a means of checking the emigration 
of wealth. I • 

* Raynal tells us, that, inasmuch as the East India Company derives a 
revenue from Bengal, to be consumed in Europe, it must infallibly drain it 
of specie in the end, since the company is the only merchant, and imports 
no specie itself. But Raynal is mistaken in this. In the first place, pri- 
vate merchants do carry the, precious metals to India, because they are of 
more value there than in Europe; and that very reason also deters the ser- 
vants of the company, who may have made fortunes in Asia, fram remitting 
them in specie. 

And if it were to be suggested, that a fortune, remitted to Europe, is less 
substantial and more speedily dissipated, M'hen it arrives in the shape of 
goods, than when in that of specie, this again would be an error. The form, 
that property happens to assume, does not affect its substantiality ; when 
once transferred to Europe, it may be converted into specie, or land, or what 
not. It is the amount of values, and not the temporary form they appear 
under, which, in this colonial connexion, as in that of international trade, 
is the essential circumstance. 

t The complete interception of all export of objects of value would not 
help them towards the point of intent ; because free communication occa- 
sions a much greater influx than efflux of wealth. Value, or wealth, is by 
nature fugitive and. independent. Incapable of all restraint, it is sure to va- 
nish from the fetters that are contrived to confine it, and to expand and 
flourish under the influence of liberty. 



(a) This is a harsh word, yet probably justified by the history of the origi- 
nal acquisition. But the scene has now changed; the servants of the sove- 
reign company no longer look to spoliation as a public or private resource, 
but are content with the liberal remuneration of laborious duties, civil, mi- 
litary, and financial. A slight examination of the connexion between Bri- 
tain and her Asiatic dependencies will show, how small a balance is remit- 
ted to the former in any shape ; and it should be remembered that part, even 
of this, is but the interest of loans raised in England, for the purposes of 
Indian administration, though not always of a wise or paternal character. 

T. 



CHAP. XI. ON DISTRIBUTION. 329 



CHAPTER XI. 

OF THE MODE IN WHICH THE QUANTITY OF THE PRODUCT AFFECTS 
POPULATION. 

SECTION I. 

Of Population, as connected loiih Political Economy. (1) 

Having, in Book I, investigated the production of the articles 
necessary to the satisfaction of human wants, and in the present 
Book, traced their distribution among the different members of 
the community, let us now further extend our observations to the 
influence those products exercise upon the number of individuals, 
of which the community is composed; that is to say, upon popu- 
lation. 

In her treatment of all organic bodies, nature seems to despise 
the individual, and afford protection only to the species. Natural 
history presents very curious examples of her extraordinary care 
to perpetuate the species ; but the most powerful means she 
adopts for that purpose is, the multiphcation of germs in such 
vast profusion, that, notwithstanding the immense variety of 
accidents occurring to prevent their early development, or de- 
stroy them in progress to maturity, there are always left more 
than sufficient to perpetuate the species. Did not accident, de- 
struction, or failure of the means of development check the 
multiplication of organic existence, there is no animal or plant 
that might not cover the face of the globe in a very few years. 

This faculty of infinite increase is common to man, with all 
other organic bodies; and although his superior intelligence 
continually enlarges his own means of existence, he must sooner 
or later arrive at the ultimum. 

Animal existence depends upon the gratification of one sole 
and immediate want, that of food and sustenance ; but man is 
enabled, by the faculty of communication with his species, to 
barter one product for another, and to regard the value, rather 
than the nature, of the product. The producer and owner of a 
piece of furniture of 100 fr. value may consider himself as pos- 
sessing as much human food, as may be procurable for that price. 
And with respect to the relative price of products, it is in all 
cases determined by the intensity of the desire, the degree of 

(1) [In the original the title of this section is made the title of the chap- 
ter, and the title of the chapter the title of the section.] American Editor. 

50 



330 ON DISTRIBUTION. book ii. 

utility in each product for the time being. We may safely take 
it for granted, that mankind in general will not barter an object 
of more, for one of less urgent necessity. In a season of agri- 
cultural scarcity, a larger quantity of furniture will be given for 
a smaller quantity of human aliment ; but it is invariably true, 
that whenever barter takes place, the object given on one side is 
worth that given on the other, and that the one is procurable for 
the other.* 

Trade and barter, as we have seen above, adapt the products 
to the general nature of the demand. The objects, whether of 
food, of raiment, or of habitation, for which the strongest desire 
is felt, are of course the most in request ; and the wants of each 
family or individual, are more or less fully satisfied, in proportioa 
to the ability to purchase these objects ; which ability depends 
upon the productive means and exertion of each respectively ; 
in plain terms, upon the revenue of each respectively. Thus, 
in the end, if we sift this matter to the bottom, we shall find, that 
families, and nations, which are but aggregations of families, 
subsist wholly on their owii products ; and that the amount of 
product in each case necessarily limits the numbers of those 
who can subsist upon it. 

Such animals as are incapable of providing for future exigen- 
cies, after they are engendered, if they do not fall a prey to man, 
or some of their fellow brutes, perish the moment they expe- 
rience an imperative want, which they have not the means of 
gratifying. But man has so many future wants to provide for, 
that he could not answer the end of his creation, without a cer- 
tain degree of providence and forethought : and this provident 
turn can alone preserve the human species from part of the evils 
it would necessarily endure, if its numbers were to be perpetually 
reduced by the process of destructive violence. | 

* Although all products are necessary to the social existence of man, the 
necessity of food being of all others most urgent and unceasing, and of most 
frequent recurrence, objects of aliment are justly placed first in the cata- 
logue of the means of human existence. They are not all, however, the 
produce of the national territorial surface ; but are procurable by commerce 
as well as by internal agriculture ; and many countries contain a greater 
number of inhabitants, than could subsist upon the produce of their land. 
Nay, the importation of another commodity may be equivalent lo an im- 
portation of an article of food. The export of wines and brandies to the 
north of Europe is almost equivalent to an export of bread ; for wine and 
brandy, in great measure, supply the place of beer and spirits distilled from 
grain, and thus allow the grain, which would otherwise be employed in the 
preparation of beer or spirits, to be reserved for that of bread. 

t The practice of infanticide in China proves, that the local prejudices 
of custom and of religion there counteract the foresight which tends to 
check the increase of population : and one can not but deplore such pre- 
judices ; for the human misery resulting from the destruction is great, in 
proportion as its object is more fully developed, and more capable of sensa- 
tion. For this reason it would be still more barbarous and irrational policy 
to multiply wars, and other means of human destruction, in order to in- 



CHAP. XI. ON DISTRIBUTION. 331 

Yet notwithstanding the forethought ascribed to man, and the 
restraints imposed upon him by reason, legislation, and social 
habits, the increase of population is always evidently co-exten- 
sive, and even something more than co-extensive, with the means , 
of subsistence. It is a melancholy but an undoubted fact, that, 
even in the most thriving countries, part of the population annu- 
ally dies of mere want. Not that all who perish from want ab- 
solutely die of hunger ; though this calamity is of more frequent 
occurrence than is generally supposed.* I mean only that they 
have not at command all the necessaries of life, and die for want 
of some part of those articles of necessity. A sick or disabled 
person may, perhaps, require nothing more than a little rest, or 
medical advice, together with, perhaps, some simple remedy to 
set him up again ; but the requisite rest, or advice, or remedy, 
are denied, or not afforded. A child may require the attentions 
of the mother, but the mother perhaps may be taken away to 
labour, by the imperious calls of necessity ; and the child perish, 
through accident, neglect, or disease. It is a fact well established 
by the researches of all who have turned their attention to statis- 
tics, that out of an equal number of children of wealthy and of 
indigent parents, at least twice as many of the latter die in in- 



crease the enjoyments of the survivors ; because the destructive scourge 
would affect human beings in a state more perfect, more susceptible of feel- 
ing and suffering, and arrived at a period of life, wrhen the mature display 
of his faculties renders man more valuable to himself and to others. 

* The Hospice de Bicetre, near Paris, contains, on the average, five or six 
thousand poor. In the scarcity of the year 1795, the governors could not 
afford them food, either so good or so abundant as usual ; and I am assured 
by the house-steward of the establishment, that at that period almost all the 
inmates died. 

It would appear from the returns given in a tract entitled " Observations 
on the Condition of the Labouring Classes," by J. Barton, that the average 
of deaths, in seven distinct manufacturing districts of England, has been 
proportionate to the dearness, or, in other words, the scarcity of subsistence. 
I subjoin an extract from his statements : 

Average price of 

Years. wheat per qr. Deaths. 

s. d. 

1801 118 3 - - - - 55,965 

1804 60 1 - - - . 44,794 

1807 73 3 - - - - 48,108 

1810 106 2 - - - - 54,864 

From ths same returns it appears, that the scarcity occasioned less mor- 
tality in the agricultural districts. The reason is manifest : the labourer is 
there more commonly paid in kind, and the high sale-price of the product 
enabled the farmer to give a high purchase-price for labour, (a) 



(a) The latter reason is not very satisfactory : for the total receipts of the 
corn-growers are probably not larger in years of scarcity, than in those of 
abundance. T. 



332 ON DISTRIBUTION. book ii„ 

farxy as of the former. In short, scanty or unwholesome diet, 
the insufficient change of linen, the want of warm and dry cloth- 
ing, or of fuel, ruin the health, undermine the constitution, and 
sooner or later bring multitudes of human beings to an untimely 
end ; and all, that perish in consequence of a want beyond their 
means to supply, may be said to die of want. 

Thus, to man, particularly in a forward state of civilization, 
a variety of products, some of them in the class of what have 
been denominated immaterial products, are necessaries of ex- 
istence ; these are multiplied in a degree proportionate to the 
desire for them, respectively, because its intensity causes a pro- 
portionate elevation of their price : and it may be laid down as 
a general maxim, that the population of a state is always pro- 
portionate to the sum of its production in every kind.* This is 
a truth acknowledged by most writers on political economy, 
however various and discordant their opinions on most other 
points-t 

It appears to me, however, that one very natural consequence, 
deducible from this maxim, has escaped their observation ; which 
is, that nothing can permanently increase population, except the 

* Not but that accidental causes may sometimes qualify these general 
rules. A country, where property is very unequally distributed, and where 
a few individuals consume produce enough for the maintenance of num- 
bers, will doubtless subsist a smaller population, than a country of equal 
production, where wealth is more equally diffused. The very opulent are 
notoriously averse to the burthen of a family ; and the very indigent are 
unable to rear one. 

t Vide Stewart, On Political Economy, book i. c. 4. Quesnay, Encyclo- 
pedic, art. Grains, Montesquieu, Esprit des Loix. liv. 18. c. 10. and liv. 23. 
c. 10. Buffon, ed. de Bernard, torn. iv. p. 266. Forhonnais, Principes et 
Observations, p. 39. 45, Hume, Essays, part 2. Ess. 2. (Euvres de Poivre, p. 
145, 146. Condillac, Le Commerce et le Gouvernement, part 1. c. 24, 25. 
Verri, Reflexions sur V Economic Politique, c. 210. Miraheau, Ami des 
Hommes, tom. i. p. 40. Raynal, Ristorie de V Estahlissement, liv. 11. s. 23. 
Chastellux, De la Felicite PuUique, tom. ii. p. 205. Necker, Administra- 
tion, des Finances de France, c. 9. and Notes sur V'Eloge de Colbert. Con- 
dorcet. Notes sur Voltaire, ed. de Kepi. tom. xlv. p. 60. Smith, Wealth of 
Nations, book i. c. 8. 11. Gamier, Abrege Elementa.ire, part 1. c. 3. and 
Preface de sa Traduction de Smith. Canard, Principes d'' Economic Poli- 
tique, p. 133. Godwin, (a) On Political Justice, book viii. c. 3. Claviere, 
De la France et des Etais Unis. ed. 2. p. 60. 315. Brown-Duignan ; Essay 
on the Principles of National Economy, p. 97. Lond. 1776. Beccaria, Ele- 
menti di Economia Publica, par. prim. c. 2. 3. Gorani, Recherches sur la 
Science du Gouvernement, tom. ii. c. 7. Sismondi, Nouv. Prin. d'Econ. Pol. 
liv. vii. c. 1. et seq. Vide also, more especially, Maltlius, Essay on Popula- 
tion, a work of considerable research ; the sound and powerful arguments 
of which would put this matter beyond dispute, if it indeed had been 
doubted. 



(«) This writer has lately adventured a refutation of the work of Malthus; 
but his arguments, though urged with sufficient ingenuity and confidence, 
have made but few converts to his opinions. T. 



CHAP. XI. ON DISTRIBUTION. 333 

encouragement and advance of production ; and that nothing can 
occasion its permanent diminution, but such circumstances as 
attack production in its sources. 

The Romans were for ever making regulatioi.s to repair the 
loss of population, occasioned by their state of perpetual exter- 
nal warfare. («) Their censors preached up matrimony ; their 
laws offered premiums and honours to plurality of children ; but 
these measures were fruitless. There is no difficulty in getting 
children ; the difficulty lies in maintaining them. They should 
have enlarged their internal production, instead of spreading de- 
vastation amongst their neighbours. All their boasted regulations 
did not prevent the effectual depopulation of Italy and Greece, 
even long before the inroads of the barbarous northern hordes.* 

The edict of Louis XVI. in favour of marriage, awarding pen- 
sions to those parents, who should have ten, and larger ones to 
those, who should have twelve children, was attended with no 
better success. The premiums that monarch held out in a thou- 
sand ways to indolence and uselessness, were much more ad- 
verse, than such poor encouragements could be conducive, to 
the increase of population. 

It is the fashion to assert, that the discovery of the new world 
has tended to depopulate old Spain ; whereas her depopulation 
has resulted from the vicious institutions of her government, and 
the small, amount of her internal product, in proportion to her ter- 
ritorial extent.| The mo^t effectual encouragement to popula- 
tion is, the activity of industry, and the consequent multiplication 
of the national products. It abounds in all industrious districts ; 
and, when a virgin soil happens to co-operate with the exertions 
of a community, whence idleness is altogether discarded, its ra- 
pid increase is truly astonishing. In the United States of Ameri- 
ca, population has been doubling in the course of twenty years. 

For the same reasons, although temporary calamities may- 
sweep off multitudes, yet, if they leave untainted the sources of 
reproduction, they are sure to prove more afflicting to humanity, 
than fatal to population. It soon trenches again upon the hmit, 
assigned by the aggregate of annual production. Messance has 
given some very curious calculations, whereby it appears, that, 
after the ravages occasioned by the famous plague of Marseilles 
in 1720, marriages throughout Provence were more fruitful than 

* Vide Livii Hist. lib. vi. Plutarchi Moralia, xxx. De defectu oraculo- 
rum. Strabonis, lib. vii. 

+ Ustariz has remarked, that the most populous provinces of Spain are 
those, from which there has been the greatest emigration to America. 



(a) The examples of England, France, and the old states of the Ameri- 
can union, prove, that, neither war nor emigration can cause any perma- 
nent reduction of a national population. T. 



S34 ON DISTRIBUTION. book ir. 

before. The Abbe d'Expilly comes to the same conclusion. 
The same effect was observable in Prussia, after the plague of 
1710. Although it had swept off a third of the population, the 
tables of Sussmilch* show the number of births, which, before 
the plague, amounted annually to about 26,000, to have advanc- 
ed in the year following, 1711, to no less than 32,000. It might 
have been supposed, that the number of marriages, after so terri- 
ble a mortality, would have been at least considerably reduced ; 
on the contrary, it actually doubled ; a strong indication of the 
tendency of population to keep always on a level with the nation- 
al resources. 

The loss of population is not the greatest calamity resulting 
from such temporary visitations ; the first and greatest is, the 
misery they occasion to the human race. Great multitudes can 
not be swept from the land of the living by pestilence, famine, or 
war, without the endurance of a vast deal of suffering and agony, 
by numbers of sentient beings ; besides the pain, distress, and 
misery of the survivors; the destitution of widows, orphans, bro- 
thers, sisters, and parents. It is a subject of additional regret, if, 
among the rest, there happen to fall one or two of those superior 
and enlightened men, whose single talents and virtues have more 
effect upon the happiness and wealth of nations, than the grovel- 
ing industry of a million of ordinary mortals. 

Moreover, a great loss of human beings, arrived at maturity, 
is certainly a loss of so much acquired wealth or capital; for eve- 
ry grown person is an accumulated capital, representing all the 
advances expended during a course of many years, in training 
and making him what he is. A bantling a day old by no means 
replaces a man of twenty ; and the well-known expression of the 
Prince de Conde, on the victorious field of Senef, was equally 
absurd and unfeeling. f 

The destructive scourges of the human species, therefore, if 
not injurious to population, are at least an outrage on humanity; 
on which account alone, their authors are highly criminal. J 

* Quoted by Malthus, in his Essay on Popul, vol. ii. 

t " Une nuit de Paris reparera tout cela." It requires the care and ex- 
penditui-e of twenty successive years to replace the full-grown man, that a 
cannon ball has destroyed in a moment. The destruction of the human 
race by war is far more extensive than is commonly imagined. The ravage 
of a cultivated district, the plunder of dwelling-houses, the demolition of 
establishments of industry, the consimiption of capital, &c. &,c. deprive 
niunbers of the means of livelihood, and cause many more to perish, than 
are left on the field of battle. 

t Upon this principle, no capital improvement of the medicinal or chi- 
rurgical art, like that of Vaccination for instance, can permanently influence 
national population ; yet its influence upon the lot of humanity may be 
very considerable ; for it may operate powerfully to preserve beings already 
far advanced in age, in strength, and in knowledge: whom to replace, 
would cost fresh births and fresh advances ; in other words, abundance of 
eacrifices, privations, and sufferings both to the parents and the children. 



CHAP. XI. ON DISTRIBUTION. 335 

But, though such temporary calamities are more afflicting to 
humanity, than hurtful to the population of nations, far other is 
the effect of a vicious government, acting upon a bad system of 
political economy. This latter attacks the very principle of po- 
pulation, by drying up the sources of production ; and, since the 
numbers of mankind, as before seen, always approach nearly to 
the utmost limits the annual revenue of the nation will admit of, 
if the government reduce that revenue by the pressure of intole- 
rable taxation, forcing the subject to sacrifice part of his capital, 
and consequently diminishing the aggregate means of subsist- 
ence and reproduction possessed by the community, such a go- 
vernment not only imposes a preventive check on further pro- 
creation, but may be fairly said to commit downright murder ; 
for nothing so effectually thins the effective ranks of mankind, as 
privation of the means of subsistence. 

The evil effects of monastic establishments upon population 
have been severely and justly inveighed against; but the mode, 
in which they operate, has been misunderstood; it is the idle- 
ness, not the celibacy, of the monastic orders, that ought to be 
censured. They put their lands into cultivation, it is true, but 
where is the merit of that? Would the lands remain untilled, if 
the monastic system were abolished? So far from that evil re- 
sulting from the abolition, wherever these estabhshments have 
been converted into manufactories, of which the French revolu- 
tion has offered many examples, equal agricultural produce has 
continued to be raised, and the produce of the manufacturing in- 
dustry has been all clear gain; while the increased total product, 
thus created, has been followed by an increase of population 
also. 

From these premises, may likewise be drawn this further con- 
clusion; that the inhabitants of a country are not more scantily 
supplied with the necessaries of Ufe, because their number is on 
the increase; nor more plentifully, because it is on the decline. 
Their relative condition depends on the relative quantity of pro- 
ducts they have at their disposal ; and it is easy to conceive these 
products to be considerable, though the population be dense; 
and scanty, though the population be thinly spread. Famine 

When population must be kept up by additional births, there is always 
more of the suffering incident to the entrance and the exit of human exist- 
ence ; for they are both of more frequent occurrence. Population may be 
kept up with half the number of births and deaths, if the average term of 
life be advanced from forty to fifty years. There will, indeed, be a greater 
waste of the germs of existence ; but the condition of mankind must be 
measured by the quantum of human suffering, whereof mere germs are not 
susceptible. The waste of them is so immense, in the ordinary course of 
nature, that the small addition can be of no consequence. Were the vege- 
table creation endowed with sensation, the best thing that could happen to 
it would be, that the seeds of all the vegetables, now rooted up and destroy- 
sd, should be decomposed before the vegetable faculties were awakened. 



336 ON DISTRIBUTION. book ii. 

was of more frequent occurrence in Europe during the middle 
ages, than it has been of late years, although Europe is evidently 
more thickly peopled at present. The product of England, dur- 
ing the reign of queen Elizabeth, was not nearly so abundant as 
it is now, although her population was then less by half; and the 
population of Spain, reduced to but eight millions, enjoys not 
nearly so much affluence, as when it amounted to twenty-four.* 

Some writers"!" have considered a dense population as an index 
of national prosperity; and, doubtless, it is a certain sign of en- 
larged national production. But general prosperity implies the 
general diffusion and abundance of all the necessaries, and some 
of the superfluities of life amongst all classes of the population. 
Some parts of India and of China are oppressed with population 
and with misery also ; but their condition would be nowise im- 
proved by thinning its numbers, at least if it were brought about 
by a diminution of the aggregate product. Instead of reducing 
the numbers of the population, it were far more desirable to aug- 
ment the gross product; which may always be effected by supe- 
rior individual activity, industry, and frugality, and the better ad- 
ministration, that is to say, the less frequent interference, of 
public authority. 

But, it will naturally be asked, if the population of a country 
regularly keeps pace with its means of subsistence, what will be- 
come of it in years of scarcity and famine? 

Hear what StewartJ says on the subject: " There is a very 
great deception as to the difference between crops; a good year 
for one soil is a bad one for another." " It is far from being 
true," he continues, " that the same number of people consume 
always the same quantity of food. In years of plenty, every one 
is well fed ; — food is not so frugally managed ; a quantity of ani- 
mals are fatted for use; — and people drink more largely, be- 
cause all is cheap. A year of scarcity comes ; the people are 
ill fed; and, when the lower classes come to divide with their 
children, the portions are brought to be very small;" instead of 
saving, they consume their previous hoard; and, after all, it is 
unhappily too true, that part of that class must suffer and perish. 

This calamity is most common in countries overflowing with 
population, like Hindustan, or China, where there is little exter- 
nal or maritime commerce, and where the poorer classes have 
always been strictly limited to the mere necessaries of life. 
There, the produce of ordinary years is barely sufficient to allow 

* If population depends on the amount of product, the number of births 
is a very imperfect criterion, by which to measure it. When industry and 
produce are increasing, births are multiplied disproportionately to the ex- 
isting population, so as to swell the estimate : on the contrary, in the de- 
clining state of national wealth, the actual population exceeds the average 
ratio to the births. 

t Wallace, Condorcet, Godwin. 

t Sir James, of Coltness, book i. c. 17. 



CHAP. xi. ON DISTRIBUTION. 337 

this miserable pittance ; consequently, the sHghtest failure of the 
crop leaves multitudes wholly destitute of common necessaries, 
to rot and perish by wholesale. All accounts agree in represent- 
ing, that famines are, for this reason, very frequent and destruc- 
tive in China and many parts of Hindustan. 

Commerce in general, and maritime commerce in particular, 
facilitates the interchange of products, even with the most re- 
mote countries, and thus renders it practicable to import articles 
of subsistence, in return for several other kinds of produce ; but 
too great a dependence on this resource, leaves the nation at the 
mercy of every natural or political occurrence, which may hap- 
pen to intercept or derange the intercourse with foreign countries. 
The intercourse must tlien be preserved at all events, no matter 
whether by force or fraud ; competition must be got rid of by 
every means, however unjustifiable, a separate province, or 
weak ally, perhaps, is obliged to purchase the national products, 
under restrictions equally galling, as the exaction of actual tri- 
bute ; and a commercial monopoly enforced, even at the hazard 
of a war; all which evils make the state of the nation extremely 
precarious indeed. 

The produce of England, in articles of human subsistence, had 
undoubtedly increased largely towards the end of the 18th cen- 
tury; but its produce in articles of apparel and household furni- 
ture had probably increased still more rapidly. The consequence 
has been, that immensity of production, which enables her to 
multiply her population beyond what the produce of her soil 
can support,* and to bear up under the pressure of pubhc bur- 
thens, to which there is no parallel nor even approximation. But 
England has suffered severely, whenever foreign markets have 
been shut against her produce; and she has sometimes been 
obliged to resort to violent means to preserve her external in- 
tercoursfe. She would act wisely, perhaps, in discontinuing 
those encouragements, that impel fresh capital into the chan- 
nels of manufacture and external commerce, and directing.it ra- 
ther towards that of agricultural industry. It is probable, that, 
in that case, several districts, which have not yet received the 
utmost cultivation of which they are susceptible, particularly 
many parts of Scotland and Ireland, would raise agricultural 
produce enough to purchase most part, if not the whole, of the 
surplus product of her manufactures and commerce beyond her 
present consumption. "j" Great Britain would thereby create for 

* In a pamphlet entitled, ConsidercHons on British Agriculture, publish- 
ed in 1814, by W. Jacob, a member of the Royal Society, and a well inform- 
ed writer upon agricultural topics, we are told, (p. 34,) that England ceas- 
ed to be an exporter, and became an importer, of wheat, about the year 
1800. 

tThe writer last cited enters into. long details to show, that the soil of 
the British isles could be made to produce at least a third more than their 
present product, ibid. p. 115. etseq. 

51 



338 ON DISTRIBUTION. book ii. 

herself a domestic consumption, which is always the surest and 
the most advantageous. Her neighbours, no longer offended by 
the necessarily jealous and exclusive nature of her policy, would 
probably lay aside their hostile feelings, and become willing cus- 
tomers. But, after all, if her manufactured, should still be dis- 
proportioned to her agricultural produce, what is there to prevent 
her from adopting a system of judicious colonization, and thus 
creating for herself fresh markets for the produce of her domes- 
tic industry in every part of the globe, whence she might derive, 
in return, a supply of food for her superfluous population 1* 

In this particular, the position of France appears to be pre- 
cisely opposite to that of Great Britain. It would seem, that her 
agricultural product is equal to the maintenance of a much larger 
manufacturing and commercial population. The face of the 
country presents the picture of high and general cultivation ; 
but the villages and country towns, are, for the most part, sur- 
prisingly small, poor, ill-built, and ill-paved, the few shops scan- 
tily supplied, and the public houses, neither neat nor comforta- 
ble. It is plain, the agricultural product must either be less than 
the appearance would indicate, or it must be consumed in a 
thriftless and unprofitable manner; probably both these causes 
are in operation. 

In the first place, the production is far less than it might be ; 
and this is chiefly owing to three causes: — 1. the want of capital, 
particularly in enclosures, live stock, and ameliorations if 2. the 
indolence of the cultivators, and the too general neglect of weed- 
ing, trimming the hedges, clearing the trees of moss, destroying 
insects, &c. &c. 3. the neglect of a proper alternation of crops, 
and of the most approved methods of cultivation, (a) 

* By judicious colonization, I mean colonization formed on the principles 
of complete expatriation, of self-government without control of the mother 
country, and of freedom of external relations ; but with the enjoyment of 
protection only by the mother country, while it should continue necessary. 
Why should not political bodies imitate in this particular the relation of 
parent and child? When arrived at the age of maturity, the personal in- 
dependence of tlie child is both just and natural; the relation it engenders 
is, moreover, the most lasting and most beneficial to both parties. Great 
part of Africa might be peopled with European colonies formed on these 
principles. The world has yet room enough, and the cultivated land on 
the face of the globe is far inferior in extent to the fertile land remaining 
untilled. The earl of Selkirk has thrown much light on this matter in 
his tract on Emigration and the State of the Highlands. 

t The want of capital prevents the employment of machinery for e:!tpe- 
diting the operations, like the thrashing machine in common use in Eng- 
land. This makes a larger supply of human agency requisite in agricul- 
ture ; and the more mouths there are to be fed, the smaller will be the sur- 
plus produce, which alone is disposable. 



(a) These causes of impoverishment are chiefly referable to the minute 
division of landed property ; the baneful effects of which, upon agricultural 
improvement and productive power, have been well observed upon in the 
Edinburgh Review, No. xvii, art. 1. T. 



CHAP. XI. ON DISTRIBUTION. 339 

In the second place, the consumption is unthrifty and unpro- 
fitable; for a great part of it is mere waste, and yields no human 
gratification whatever. To speak of one article alone, that is, 
of firing, which is an object of great value in districts, where coal 
and wood are scarce ; the waste of it is enormous in the huts of 
the peasantry, lighted as they often are by the door-way only, and 
admitting the rain down the chimney wiiile the fire is burning. 
Unwholesome beverage or food, and the indulgence of the ale- 
house, are like injurious modes of consumption. 

In fine, towns and villages would be more thickly spread, and 
would besides present an appearance of greater affluence, were 
the generality of the inhabitants more a-ctive and industrious, and 
actuated by the laudable emulation, tinctured perhaps with some 
little vanity, rather of possessing every object of real utility, and 
exhibiting in their domestic arrangements the utmost order and 
neatness, than of living in indolence upon the rent of a trifling 
patrimony, or the scanty salary of some useless public employ. 
The small proprietor with an income of 1 or 2000 /r. per annum, 
just sufficient to vegetate upon, might double or triple it perhaps 
by adding the revenue derivable from personal industry; and even 
those, engaged in useful occupations, do not push them to the 
full extent of their activity and intelligence. Moreover, the spirit 
of inquiry and improvement has probably been disheartened by 
the example of frequent ill success; although the failure has com- 
monly been occasioned by the want of judgment, perseverance, 
and frugality. 

National population is uniformly proportionate to the quantum 
of national production; but it may vary locally within the limits of 
each state, according to the favourable, or unfavourable opera- 
tion of local circumstances. A particular district will be rich, be- 
cause its soil is fertile, its inhabitants industrious, and possessed 
of capital accumulated by their frugality; in hke manner as a 
family will surpass its neighbours in wealth, because of its supe- 
rior intelligence and activity. The boundaries and political consti- 
tutions of states affect population only, inasmuch as they affect 
the national production. The influence of religion and national 
habits upon population is precisely analogous. All travellers agree 
that protestant are both richer and more populous than catholic 
countries ; and the reason is, because the habits of the former are 
more conducive to production. 



340 ON DISTRIBUTION. book ii. 



SECTION II. 

Of the influence of the Qualihj of a national product upon the local 
distribution of the Population. 

For the earth to be cultivated, it is necessary that population 
should be spread over its surface ; for industry and commerce to 
flourish, it is desirable to bring it together in those spots, where 
the arts may be exercised with the most advantage ; tliat is to 
say, where there can be the greatest subdivision of labour. The 
dyer naturally establishes himself near the clothier; the druggist 
near the dyer ; the agent, or owner, of a vessel employed in the 
transport of drugs will approximate in locahty to the druggist ; 
and so of other producers in general. 

At the same time, all such as live without labour on the inte- 
rest of capital, or the rent of landed property, are attracted to the 
towns, where they find brought to a focus every luxury to feed 
their appetites, as well as a choice of society, and a variety of 
pleasure and amusement. The charms of a town life attract fo- 
reign visiters, and all such as live by their labour, but are free to 
exercise it wherever they like. Thus, towns become the abode 
of literary men and artisans, and likewise the seat of government, 
of courts of justice, and most other public establishments ; and 
their population is enlarged by the addition of all the persons at- 
tached to such establishments, and all who are accidentally 
brought thither by business. 

Not but what there is always a number of country residents, 
that are employed in manufacturing industry, exclusive of such 
as make it their abode in preference. Local convenience, running 
water, the contiguity of a forest or a mine, will draw a good deal 
of machinery, and a number of labourers, in manufacture, out 
of the precincts of towns. There are, likewise, some kinds 
of work, which must be performed in the neighbourhood of 
the consumers ; that of the tailor, the shoemaker, or the farrier ; 
but these are trifling compared with the manufacturing industry 
of all kinds executed in towns. 

Writers on political economy have calculated, that a thriving 
country is capable of supporting in its towns, a population equal 
to that of the country. Some examples lead to an opinion, that 
it could support a still greater proportion, were its industry direct- 
ed with greater skill, and its agriculture conducted with more in- 
telligence and less waste, even supposing its soil to be of very 
moderate fertility.* Thus much at least is certain, that, when 

* There is good reason to believe, that the total population of England 
is more than the double of that employed in her internal agriculture. From 
the returns laid before parliament, 1811, it appears there were in Great Bri- 



CHAP. XI. ON DISTRIBUTION. 341 

the towns raise product for foreign consumption, they are then 
enabled to draw from abroad provisions in return, and may 
sustain a population much larger in proportion to that of the 
country. Of this we have instances in the numerous petty states, 
whose territory alone is barely sufficient to afford subsistence to 
one of the suburbs of their capital. 

Again, the cultivation of pasture land, requiring much less 
human labour than that of arable, it follows, that, in grazing- 
countries, a greater proportion of the inhabitants can apply them- 
selves to the arts of industry; which are therefore more attended 
to in pasture than in corn countries. Witness Flanders, Holland, 
and Normandy that was. (6) 

From the period of the irruption of the barbarians into the 
Roman empire, down to the ITth century, that is to say, to a 
date almost within living memory, the towns made but little figure 
in the larger states of Europe. That portion of the population, 
which was thought to live upon the cultivators of the land, was 
not then, as now, composed principally of merchants and manu- 
facturers, but consisted of a nobility, surrounded by numerous 

tain, inclusive of Wales and Scotland, 895,998 families employed in agricul- 
ture ; and that the total number of families amounted to 2,544,215, vp-hich 
would give but a third of the population to the purposes of agriculture. 

According to Arthur Young, the country population of France, within 
her old limits, was - - - - - 20,521,538 

And that of the cities and towns, - - 5,709,270 



Making a total of - - - - - 26,230,808 

Supposing him to be correct, France, within her old boundary, could 
maintain, on this principle, a population of 41 millions, supposing her mere- 
ly to double her agricultural population ; and of 60 millions, supposing her 
industry were equally active with that of Great Britain, (a) 

It is the general remark of travellers, that the traffic of the great roads 
of France is much less, than might be expected, in a country possessing so 
many natural advantages. This may be attributed chiefly to the small 
number and size of her towns ; for it is the communication from town to 
town that peoples the great road ; that of the rural population being princi- 
pally from one part of the village or farm to another. 



(a) Our author has here fallen into a palpable error. The ratio of the 
agricultural, to the total population of Great Britain, has not been varied 
as above stated, solely, or even chiefly by the multiplication of the commer- 
cial and manufacturing classes ; but by the transfer of the human labour 
spared in agriculture to the two other branches of industry. Agriculture 
might occupy one third only of the population of France, and yet the total 
population be decreased and not multiplied. T. 

(b) This position is too general. A pastoral nation, devoting the whole 
of its territory to pasture, could spare a very small proportion of its popu- 
lation for commerce and manufacture ; witness Tartary and the Pampas of 
South America. Where a dense manufacturing and commercial population 
makes it advantageous to the land-holder to devote his land to pasture, and 
look to foreigners for the supply of corn, as in Holland, a small proportion 
of the population may, indeed, be required for domestic, but a large propor- 
tion will be required for the animation of foreign agriculture. T. 



342 ON DISTRIBUTION. book n. 

retainers, of churchmen and other idlers, the tenants of the cha- 
teau, the abbey, or the convent, with their several dependencies; 
very few of them living witliin the towns. The products of ma- 
nufacture and commerce were very limited indeed ; the manu- 
facturers were the poor cottagers, and the merchants mere ped- 
lers ; a few rude implements of husbandry, and some very 
clumsy utensils and articles of furniture, answered all the purposes 
of cultivation and ordinary life. The fairs, held three or four 
times in the year, furnished commodities of a superior quality, 
which we should now look upon with contempt ; and what rare 
household articles, stuffs, or jewels, of price, were from time to 
time imported from the commercial cities of Italy, or from the 
Greeks of Constantinople, were regarded as objects of uncom- 
mon luxury and magnificence, far too costly for any but the rich- 
est princes and nobles. 

In this state of things, the towns of course made but a poor 
figure. Whatever magnificence they may possess in our time 
is of very modern date. In all the towns of France together, it 
would be impossible to point out a single handsome range of 
buildings, or fine street, of two hundred years' antiquity. There 
is nothing of anterior date, with the exception of a few gothic 
churches, but clumsy tenements huddled together in dirty and 
crooked streets, utterly impassable to the swarm of carriages, 
cattle, and foot-passengers, that indicates the present population 
and opulence. 

No country can yield the utmost agricultural produce it is 
equal to, until every part of its surface be studded with towns and 
cities. Few manufactures could arrive at perfection, without the 
conveniences they afford ; and, without manufactures, what is 
there to give in exchange for agricultural products'? A district, 
whose agricultural products can find no market, feeds not half 
the number of inhabitants it is capable of supporting; and the con- 
dition, even of those it does support, is rude enough, and desti- 
tute both of comfort and refinement; they are in the lowest stage 
of civilization. But, if an industrious colony comes to establish 
itself in the district, and gradually forms a town, whose inhabi- 
tants increase till they equal the numbers of the original cultiva- 
tors, the town will find subsistence on the agricultural product of 
the district, and the cultivators be enriched by the product of the 
industry of the town. 

Moreover, towns offer indirect channels for the export of the 
agricultural values of the district to a distant market. The raw 
products of agriculture are not easy of transport, because the 
expense soon swallows up the total price of the commodity trans- 
ported. Manufactured produce has greatly the advantage in this 
respect ; for industry will frequently attach very considerable 
value to a substance of little bulk and weight. By the means of 
manufacture, the raw products of national agriculture are con- 



CHAP. XI. ON DISTRIBUTION. 343 

verted into manufactured goods of much more condensed value, 
which will defray the charge of a more distant transport, and 
bring a return of produce adapted to the wants of the exporting 
country. 

There are many of the provinces of France, that are misera- 
ble enough at present, yet want nothing but towns to bring them 
into high cultivation. Their situation would, indeed, be hopeless, 
were we to adopt the system of that class of economists, which 
recommends the purchase of manufactures from foreign coun- 
tries, with the raw produce of domestic agriculture. (1) 

However, if towns owe their origin and increase to the con- 
centration of a variety of manufactures, great and small, manu- 
factures, again, are to be set in activity by nothing but produc- 
tive capital; and productive capital is only to be accumulated by 
frugality of consumption. Wherefore, it is not enough to trace 
the plan of a town, and give it a name; before it can have real 
existence, it must be gradually supplied with industrious hands, 



(1) [The slow progress of agriculture in these provinces of France is not 
attributable to the want of towns in the midst of them ; towns and cities 
are a consequence, not the cause of the general prosperity of a country. 
Nor. would the adoption of a different policy from that which recommends 
the purchase of manufactures from foreign countries with the raw produce 
of domestic agriculture, improve the situation of these districts. A system 
of policy which should attempt by restraits or encouragements, to divert a 
portion of the capital and industry employed in agriculture or commerce 
from those channels towards the erection of a town, or the establishment of 
a manufactory, with a view to promote the better cultivation of the soil, 
would be subversive of this end. 

To what causes then must the misery, said by our author to prevail in 
those provinces be ascribed, or M'hat has retarded their agricultural im- 
provement? The prosperity of agriculture, as well as that of every other 
branch of industry, depends upon the unrestrained operation of individual 
interest; not only furnishing motives to exertion, but knowledge to direct 
that exertion. All that is necessary to enable a state to reach the highest 
pitch of opulence, is not to disturb tlie action of this important principle. 
The obstacles, it will accordingly be found, which have opposed the pro- 
gress of improvement in the countries alluded to, may be traced to the in- 
terference by the public authorities with the salutary operation of this 
powerful motive of action, or, in other words, to their bad laws and political 
institutions. Sometimes imposing restraints on the cultivator, and expos- 
ing him to numberless oppressions, either by prescribing the mode in which 
the soil shall be cultivated, or the products it shall yield. And, when not 
thus directly interfering with the business of production, prohibiting the 
exportation of the raw produce of the soil, and thereby depriving it of the 
best market. At other times harassing the husbandman with taxation, the 
shameful inequalities of which, whilst they relieve the higher orders, per- 
mit the burden to fall, almost exclusively, on his shoulders, or depriving 
him of the freedom of trade from province to province within his own coun- 
try; but, above all, by perpetuating the inheritance of landed property in 
particular bodies or families, without the power of alienation. These are a 
few of the corrupt and barbarous laws which have retarded the agriculture, 
not of these particular provinces of France only, but of many of the fairest 
portions of Europe.] American Editor. ■ 



344 ON DISTRIBUTION. book ii. 

mechanical skill, implements of trade, raw materials, and the ne- 
cessary subsistence of those engaged in industry, until the com- 
pletion and sale of their products. Otherwise, instead of found- 
ing a city, a mere scaffolding is run up, which must soon fall to 
the ground, because it rests upon no solid foundation. This was 
the case with regard to Ecatherinoslaw, in the Crimea; and was, 
indeed, foreseen by the emperor Joseph II., who assisted at the 
ceremony of its foundation, and laid the second stone in due 
form: "The empress of Russia and myself," said he to his 
suite, "have completed a great work in a single day: she has 
laid the first stone of a city, and I have laid the finishing one." 

Nor will capital alone suffice to set in motion the mass of in- 
dustry and the productive energy necessary to the formation and 
aggrandizement of a city, unless it present also the advantages 
of locality and of beneficent public institutions. The local posi- 
tion of Washington, it should seem, is adverse to its progress in 
size and opulence; for it has been outstripped by most of the 
other cities of the Union; (1) whereas, Palmyra, in ancient 
times, grew both wealthy and populous, though in the midst of 
a sandy desert, solely because it had become the entrepot of 
commerce between Europe and eastern Asia. The same ad- 
vantage gave importance and splendour to Alexandria, and, at a 
still more remote period, to Egyptian Thebes. The mere will 
of a despot could never have made it the city of a hundred gates,- 
and of the magnitude and populousness recorded by Herodotus. 
Its grandeur must have been owing to its vicinity to the Red 
Sea and the channel of the Nile, and to its central position be- 
tween India and Europe, (a) 

If a city can not be raised, neither does it seeiri, that its fur- 
ther aggrandizement can be arrested by the mers fiat of the mo- 
narch. Paris continued to increase, in defiance of abundance of 



(a) There is some stretch of imag-ination in this. Probably the Egyptian 
Thebes was itself the centre of manufacture and commerce in its day, and 
not its entrepot; indeed, there is no reason to suppose a very active inter- 
course between India and Europe to have existed at s.o early a period ; and, 
if it had, Thebes would hardly have been the entrepot. But central India 
furnishes itself instances of cities containing- as large a population. Nineveh 
and Babylon seem to have been quite as populous; each was probably the 
central point of an enormous domestic industry. T. 



(1) [The local position of Washington, perhaps, is not as advantageous 
as that of some of the other cities of the Union, it certainly, however, has 
not been adverse to its progress in population and wealth. In the year 
1800, when Washington became the seat of the general government, its 
whole population amounted to 3,210; according to the census of 1890 it 
now contains 13,322 inhabitants, and 2,208 buildings, 925 of which were of 
brick. It can not, therefore, be said to have been outstripped by most of 
the other cities in the progress of improvement.] American Editor. 



CHAP. XI. ON DISTRIBUTION. 345 

regulations issued by the government of the day to limit its ex- 
tension. The only effectual barrier is that opposed by natural 
causes, which it would be very difficult to define with precision, 
for it consists rather of an aggregate of little inconveniences, than 
of any grand or positive obstruction. In overgrown cities, the 
municipal administration is never well attended to; a vast deal 
of valuable time is lost in going from one quarter to another; the 
crossing and jostling is immense in the central parts; and the 
narrow streets and passages, having been calculated for a much 
smaller population, are unequal to the vast increase of horses, 
carriages, passengers, and traffic of all sorts. This evil is felt 
most seriously at Paris, and accidents are growing more frequent 
every day; yet new streets are now building on the same defec- 
tive plan, with a certain prospect of a like inconvenience in a 
very few years hence. 



52 



BOOK III. 

OF THE CONSUMPTION OF WEALTH. 



CHAPTER 1. 

OF THE DIFFERENT KINDS OF CONSUMPTION. 

In the course of my work, I have frequently been obliged to 
anticipate the explanation of terms and notions which, in the na- 
tural order, should have been postponed to a later period of the 
investigation. Thus, I was obliged in the first book to explain 
the sense, in which I used the term, consumption, because pro- 
duction can not be effected without consumption. 

My reader will have seen from the explanation there given, 
that, in like manner as by production is meant the creation, not 
of substance, but of utility, so by consumption is meant the de- 
struction of utility, and not of substance, or matter. When once 
the utihty of a thing is destroyed, there is an end of the source 
and basis of its value ; — an extinction of that, which made it an 
object of desire and of demand. It thenceforward ceases to pos- 
sess value, and is no longer an item of wealth. 

Thus, the terms, to consume, to destroy the utility, to annihi- 
late the value of any thing, are as strictly synonymous as the op- 
posite terms to produce, to communicate utility, to create value, 
and convey to the mind precisely the same idea. Consumption, 
then, being the destruction of value, is commensurate, not with 
the bulk, the weight, or the number of the products consumed, 
but with their value. Large consumption is the destruction of 
large value, whatever form that value may happen to have as- 
sumed. 

Every product is liable to be consumed ; because the value, 
which can be added to, can likewise be subtracted from, any ob- 
ject. If it has been added by human exertion or industry, it 
may be subtracted by human use, or a variety of accidents. But 
it can be more than once consumed ; value once destroyed can 
not be destroyed a second time. Consumption is sometimes 



348 ON CONSUMPTION. book in. 

rapid, sometimes gradual. A house, a ship, an implement of 
iron, are equally consumable as a loaf, a joint of meat, or a coat. 
Consumption again may be but partial. A horse, an article of 
furnitm-e, or a house when re-sold by the possessor, has been 
but partially consumed; there is still a residue of value, for which 
an equivalent is received in exchange on the re-sale. Some- 
times consumption is involuntary, and either accidental, as when 
a house is burnt, or a vessel shipwrecked, or contrary to the 
consumer's intention, as when a cargo is thrown overboard, or 
stores set on fire to prevent their falling into enemies' hands. 

Value may be consumed, either long after its production, or 
at the very moment, and in the very act of production, as in the 
case of the pleasure afforded by a concert, or theatrical exhibi- 
tion. Time and labour may be consumed; for labour, applica- 
ble to an useful purpose, is an object of value, and, when once 
consumed, can never be consumed again. 

Whatever can not possibly lose its value is not liable to con- 
sumption. A landed estate can not be consumed; but its annual 
productive agency may; for, when once that agency has been 
exerted, it can not be exerted again. The improvements of an 
estate may be consumed, although their value may possibly ex- 
ceed that of the estate itself; for these improvements are the 
effect of human exertion and industry; but the land itself is in- 
consumable.* 

So likewise it is with any industrious faculty. One may con- 
sume a labourer's day's work, but not his faculty of working; 
which, however, is liable to destruction by the death of the per- 
son possessing it. 

All products are consumed sooner or later; indeed they are 
produced solely for the purpose of consumption, and, whenever 
the consumption of a product is delayed after it has reached the 
point of absolute maturity, it is value inert and neutralized for 
the time. For, as all value may be employed re-productively, 
and made to yield a profit to the possessor, the withholding a 
product from consumption is a loss of the possible profit, in other 
words, of the interest its value would have yielded, if usefully 
employed. I 

* Some materials are capable of receiving and discharging the same kind 
of value many times over; as linen, which will undergo repeated washing. 
The cleanliness given it by the laundress, is a value wholly consumed on 
each occasion, along with a part of that of the linen itself. 

t The values not consumed sooner or later in a useful way are of little 
moment ; such are provisions spoiled by keeping, products lost accidentally, 
and those whose use has become obsolete, or which have never been used 
at all, owing to the failure of the demand for them, wherein value origi- 
nates. Values buried, or concealed, are commonly withdrawn but for a time 
from consumption; when found, it is always the interest of the finder to 
turn them to account, which he can not do without submitting them to 
consumption. In this case, the only loss is that of the profit derivable from 



CHAP. I. ON CONSUMPTION. 349 

But, products being universally destined for consumption, and 
that too in the quickest way, how, it may be asked, can there be 
ever an accumulation of capital, that is to say, of values produc- 
ed? 

I answer — that value may be accumulated, without being ne- 
cessarily vested all the while in the same identical product, pro- 
vided only that it be perpetuated in some product or other. Now, 
values employed as capital are perpetuated by re-production; the 
various products of which capital consists, are consumed like all 
other products : but their value is no sooner destroyed by con- 
sumption, than it re-appears in another, or a similar substance. 
A manufactory can not be kept up, without a consumption of vic- 
tuals and clothes for the workmen, as well as of the raw materi- 
al of manufacture; but, while value in those forms is undergoing 
consumption, new value is communicated to the object of manu- 
facture. The items, that composed the capital so expended, are 
consumed and gone; but the capital — the accumulated value, still 
exists, and re-appears under a new form, applicable to a second 
course of consumption. Whereas, if consumed unproductively, 
it never re-appears at all. 

The annual consumption of an individual is, the aggregate of 
all the values consumed by that individual within the year. The 
annual consumption of a nation is, the aggregate of values con- 
sumed within the year by all the individuals and communities, 
whereof the nation consists. 

In the estimate of individual or national consumption, must be 
included every kind of consumption, whatever be its motive or 
consequence, whether productive of new value or not. ; in like 
manner, as the estimate of the annual production of a nation com- 
prises the total value of its products raised within the year. Thus, 
a soap manufactory is said to consume such or such a quantity 
or value of alkali in a year, although this value be re-produced 
from the manufactory in the shape of soap ; on the other hand, 
it is said to produce annually such and such a quantity or value 
of soap, although the production may have cost the destruction 
of a great variety of values, which, if deducted, would vastly re- 
duce the apparent product. By annual production or consump- 

them during the period of their disappearance, and may be reckoned equi- 
valent to the interest for that time. 

The same observation applies to the minute savings, successively laid by 
until the moment of investment, the aggregate of which is, doubtless, con- 
siderable. The loss, resulting from this inertness of capital, may be partial- 
ly remedied by moderating the duties on transfer, by extending to the ut- 
most the facility of circulation, and by the establishment of banks of depo- 
site, in which capital may be safely vested, and whence it may readily be 
withdrawn. In times of political confusion, and under an arbitrary govern- 
ment, many will prefer to keep their capital inactive, concealed, and unpro- 
ductive, either of profit, or gratification, rather than run the risk of its dis- 
play. This latter evil is never felt under a good government. 



350 ON CONSUMPTION. book hi. 

tion, national or individual, is therefore meant, the gross, and not 
the net amount.* 

Whence it naturally follows, that all the commodities, which a 
nation imports, must be reckoned as part of its annual product, 
and all its exports as part of its annual consumption. The trade 
of France consumes the total value of the silk it exports to the 
United States ; and produces, on the other hand, the total value 
of cotton received in return. And, in like manner, the manufac- 
ture of France consumes the value of alkali employed by the 
soap-boiler, and produces the value of soap derived from the 
concern. 

The total annual consumption of a nation, or an individual, is 
a very different thing from the aggregate of capital. A capital 
may be wholly or partially consumed several times in a year. 
When a shoemaker buys leather, and cuts and works it up into 
shoes, there is so much capital consumed and reproduced. Eve- 
ry time he repeats the operation, there is so much more capital 
consumed. Suppose the leather puchased to amount to 200 /r., 
and the operation to be repeated 12 times in the year, there will 
have been an annual consumption of 2400 /r. upon a capital of 
200/r. On the other hand, there may be portions of his capital, 
implements of trade, for instance, which it may take several years 
to consume. Of this part of his capital he may consume annual- 
ly but I or -^-^ perhaps. 

In each country, the wants of the consumer determine the 
quality of the product. The product most wanted is most in de- 
mand ; and that which is most in demand yields the largest pro- 
fit to industry, capital, and land, which are therefore employed 
in raising this particular product in preference ; and, vice versa, 
when a product becomes less in demand, there is less profit to 
be got by its production ; it is, therefore, no longer produced. 
All the stock on hand falls in price ; the low price encourages 
the consumption, which soon absorbs the stock in hand. 

The total national consumption may be divided into the heads 
of pubUc consumption, and private consumption ; the former is 
effected by the pubhc, or in its service ; the latter by individuals 
or families. Either class may be productive or unproductive. 

In every community, each member is a consumer ; for no one 
can subsist, without the satisfaction of some necessary wants, 
however confined and limited ; on the other hand, all, who do 
not live on mere charity, or gratuitous bounty, contribute some- 
how to production, by their industry, their capital, or their land ; 
wherefore, the consumers may be said to be themselves the pro- 
ducers ; and the great bulk of consumption takes place amongst 

* For tJie distinction between the gross and the net product, vide supra. 
Book II. chap. 5. 



CHAP. I. ON CONSUMPTION. 351 

the middling and poorer classes, whose numbers more than coun- 
terbalance the smallness of the share allotted to each.* 

Opulent, civilized, and industrious nations, are greater con- 
sumers than poor ones, because they are infinitely greater pro- 
ducers. They annually, and in some cases, several times in 
the course of the year, re-consume their productive capital, which 
is thus continually renovated ; and consume, unproductively, the 
greater part of their revenues, whether derived from industry, 
from capital, or from land. 

It is not uncommon to find authors proposing, as the model 
for imitation, those nations, whose wants are few ; whereas, it is 
far preferable to have numerous wants, along with the power to 
gratify them. This is the way at once to multiply the human 
species, and to give to each a more enlarged existence. 

Stewart! extols the Lacedaemonian policy, which consisted in 
practising the art of self-denial in the extreme, without aiming at 
progressive advancement in the art of production. But herein 
the Spartans were rivalled by the rudest tribes of savages, which 
are commonly neither numerous nor amply provided. Upon 
this principle, it would be the very acme of perfection to produce 
nothing and to have no wants ; that is to say, to annihilate human 
existence. 



CHAPTER II. 

OP THE EFFECT OF CONSUMPTION IN GENERAL. 

The immediate effect of consumption of every kind is, the loss 
of value, consequently, of wealth, to the owner of the article con- 
sumed. This is the invariable and inevitable consequence, and 
should never be lost sight of in reasoning on this matter. A 

* It is probable, that, in all countries, anywise advanced in industry, the 
revenues of industry exceed those of capital and land united, and, conser 
quently, that the consumption of those deriving income soiely from indus- 
try, and wholly dependent for subsistence upon their personal faculties, ex- 
ceeds that of both capitalists and landlords together. It is not uncommon 
to meet with a manufactory, that, with a capital, say of 600,000/r. will j)ay 
daily in wages to its people, 300 /n, which, with the deduction of Sundays 
and holidays, makes 9OG,00OyV. per annum; if to this be added, 20,000 /r. 
more for the net profits of personal superintendence and management, it will 
give a total of 110,000 /r. per annum, for the revenue of industry alone. 
The same capital, vested in land at but 20 years' purchase, would yield a 
revenue of 30,000 /r. only. 

The cultivation by metayers, the very lowest description of farmers, gives 
to them, and their subordinate labourers' industry, a revenue equal to that 
of the land jointly with the capital, which is advanced by the proprietor. 

i Book II. chap. 14. 



352 ON CONSUMPTION. book iir. 

product consumed is a value lost to all the world and to all eterr 
nity ; but the further consequence, that may follow, will depend 
upon the circumstances and nature of the consumption. 

If the consumption be unproductive, there usually results the 
gratification of some want, but no reproduction of value whatever ; 
if productive, there results the satisfaction of no want, but a 
creation of new value, equal, inferior, or superior in amount to 
that consumed, and profitable or unprofitable to the adventurer 
accordingly.* 

Thus, consumption may be regarded as an act of barter, 
wherein the owner of the value consumed gives up that value 
on the one hand, and receives in return, either the satisfaction 
of a personal want, or a fresh value, equivalent to the value con- 
sumed. 

It may be proper here to remark, that consumption, produc- 
tive of nothing beyond a present gratification, requires no skill 
or talent in the consumer. It requires neither labour nor inge- 
nuity to eat a good dinner, or dress in fine clothes.f On the 
contrary, productive consumption, besides yielding no imme- 
diate or present gratification, requires an exertion of combined 
labour and skill, or, of what has all along been denominated, 
industry. 

When the owner of a product ready for consumption has him- 
self no industrious faculty, and wishes, but knovrs not how, to 
consume it productively, he lends it to some one more industri- 
ous than himself, who commences by destroying it, but in such 
a way, as to reproduce another, and thereby enable himself to 
make a full restitution to the lender, after retaining the profit of 
his own skill and labour. The value returned consists of dif- 
ferent objects from that lent, it is true : indeed, the condition of 
a loan is in substance this ; to replace the value lent, of what- 
ever amount, say, of 10,000 /r., at a time specified, by other 

* This may be illustrated by the burning of fuel in a grate or furnace. The 
fuel burnt serves, either to give warmth, or to cook victuals, boil dyeing 
ingredients, and the like, and thereby to increase their value. There is no 
utility in the mere gratuitous act of burning, except inasmuch as it tends 
to satisfy some human want, that of warmth for instance ; in which case, 
the consumption is unproductive ; or inasmuch as it confers upon a sub- 
stance submitted to its action, a value, that may replace the value of the 
fuel consumed ; in which case the consumption is productive. 

If the fuel, burnt for the sake of warmth, produce either no warmth at 
all or very little ; or that burnt to give value to a substance give it no value, 
or a less value, than the value consumed in fuel, the consumption will be 
ill-judged and improvident. 

t There is unquestionably a sort of talent requisite in the expenditure of 
a large income with credit to the proprietor, so as to gratify personal taste, 
without awakening the self-love of others ; to oblige without the sense of 
humiliation ; to labour for the public good, without alarming individual in- 
terests. But this kind of talent is referable rather to the head of J)ractical, 
while its iniiuence upon the rest of mankind falls within the province of 
theoretical, morality. 



CHAP. II. ON CONSUMPTION. 353 

value, equivalent to the same amount of silver coin of the like 
weight and quality at the time of repayment. An object, lent 
on condition of specific restitution, can not be available for re- 
production ; because, by the terms of the loan, it is not to be 
consumed. 

Sometimes a producer is the consumer of his own product ; 
as when the farmer eats his ovt^n poultry or vegetables ; or the 
clothier wears his own cloth. But, the objects of human con- 
sumption being far more varied and numerous, than the objects of 
each person's production respectively, most operations of con- 
sumption are preceded by a process of barter. He first turns 
into money, or receives in that shape, the values composing his 
individual revenue ; and then changes again that money for the 
articles he purposes to consume. Wherefore, in common par- 
lance, to spend and to consume have become nearly synonymous. 
Yet by the mere act of buying, the value expended is not lost ; 
for the article purchased has likewise a value, which may be 
parted with again for what it cost, if it has not been bought over 
dear. The loss of value does not happen till the actual con- 
sumption, after which the value is destroyed ; it then ceases to 
exist, and is not the object of a second consumption. For this 
reason, it is, that, in domestic life, the bad management of the 
wife soon runs through a moderate fortune ; for she in general 
regulates the daily consumption of the family, which is the chief 
source of expense, and one that is always recurring. 

This will serve to expose the error of the notion, that where 
there is no loss of money, there can be no loss of wealth. It 
is the commonest thing in the world to hear it roundly asserted, 
that the money spent is not lost, but remains in the country ; 
and, therefore, that the country can not be impoverished by its 
internal expenditure. It is true, the value of the money rfiraains 
as before ; but the object, or the hundred objects, perhaps, that 
have been successively bought with the same money, have been 
consumed, and their value destroyed. 

Wherefore, it is superfluous, I had almost said ridiculous, tiJ 
confine at home the national money, for the purpose of preserv- 
ing national wealth. Money by no means preveiiis the conspnip* 
tion of value, and the consequent diminution of wealth ; on the 
contrary, it facilitates the arrival of consumable objects at their 
ultimE^te destination ; which is a most beneficial act, when the 
end is well chosen, and the result satisfactory. Nor would it be 
correct even to mairttain, that th,e export of specie is at all events 
a loss, although its presence in the country may ie no hindrance 
to consumption or to the diminution of weal*^- For, unless it 
be made without any view to a return, which is rarely the case, 
it is in fact the same thing as productive consumption; being 
merely a sacrifice of one value, for the purpose of obtaining an- 

53 



354 ON CONSUMPTION. book in. 

other. Where no return whatever is in view, there indeed is so 
much loss of national capital; but the loss would be quite as 
great, were goods, and not money, so exported. 



OF THE EFFECT OF PRODUCTIVE CONSUMPTION. 

The" nature of productive consumption has been explained 
above in Book I. The value absorbed by it is what has been 
called, Capital. The trader, manufacturer, and cultivator, pur- 
chase the raw material* and productive agency, which they con- 
sume in the preparation of new products ; and the immediate ef- 
fect is precisely the same, as that of unproductive consumption ; 
viz. to create a demand for the objects of their consumption, 
which operates upon their price, and upon their production; and 
to cause a destruction of value. But the ultimate effect is differ 
rent ; there is no satisfaction of a human want, and no resulting 
gratification, except that accruing to the adventurer from the pos- 
session of the fresh product the value of which replaces that of 
the products consumed, and commonly affords him a profit into 
the bargain. 

To this position, that productive consumption does not imme- 
diately satisfy any human want, a cursory observer may possibly 
object, that the wages of labour, though a productive outlay, go 
to satisfy the wants of the labourer, in food, raiment, and amuse- 
ment perhaps. But, in this operation, there is a double consump- 
tion ; 1. of the capital consumed productively in the purchase 
of productive agency, wherefrom resuUs no human gratification : 
2. of the daily or weekly revenue of the labourer, i. e. of his pro- 
d^ictive agency, the recompense for which is consumed unpro- 
du^jtively by himself and his family, in like manner as the rent of 
the aaanufactory, which forms the revenue of the landlord, is by 
him ce^nsumed unproductively. And this does not imply the con- 
sumptiCm of the same value twice over, first productively, and af- 
terwards flnproductively; for the values consumed are two distinct 
values resting upon bases altogether different. The first, the 
productive agt«cy of the labourer, is the effect of his muscular 

* The raw materivis of manufacture and commerce are, the products 
bought with a view to '4ie communication to them of further value. Cali- 
coes are raw material to 1?ae calico-printer, and printed calicoes to the deal- 
er who buys them for re.sate or export. In commerce, every act of pur- 
chase is an act of consumptioiL; and every act of re-sale, an act of reproduc- 
tion. 



CHAP. III. ON CONSUMPTION. 355 

power and skill, which is itself a positive product, bearing value 
like any other. The second is a portion of capital, given by the 
adventurer in exchange for that productive agency. After the 
act of exchange is once completed, the consumption of the value 
given on either side is contemporaneous, but with a different ob- 
ject in view ; the one being intended to create a new product, 
the other to satisfy the wants of the productive agent and his fa- 
mily. Thus, the object, expended and consumed by the adven- 
turer, is the equivalent he receives for his capital; and that, con- 
sumed unproductively by the labourer, is the equivalent for his 
revenue. The interchange of these two values, by no means 
makes them one and the same. 

So likewise, the intellectual industry of superintendence is re- 
productively consumed in the concern ; and the profits, accruing 
to the adventurer as its recompense, are consumed unproductively 
by himself and his family. 

In short, this double consumption is precisely analogous to that 
of the raw material used in the concern. The clothier presents 
himself to the wool-dealer, with 1000 crowns in his hand ; there 
are, at this moment, two values in existence ; on the one side, 
that of the 1000 crowns, which is the result of previous produc- 
tion, and now forms a part of the capital of the clothier ; on the 
other, the wool constituting a part of the annual product of a 
grazing farm. These products are interchanged, and each is 
separately consumed ; the capital converted into wool, in a way 
to produce cloth ; the product of the farm, converted into crown- 
pieces, in the satisfaction of the wants of the wants of the farmer, 
or his landlord. 

Since every thing consumed is so much lost, the gain of repro- 
ductive consumption is equal, whether proceeding from reduced 
consumption, or from enlarged production. In China, they make 
a great saving in the consumption of seed-corn, by following the 
drilling, in lieu of the broad-cast, method. The effect of this 
saving is precisely the same, as if the land were, in China, pro- 
portionately more productive than in Europe.* 

In manufacture, when the raw material used is of no value 
whatever, it is not to be reckoned as forming any part of the re- 
quisite consumption of the concern ; thus, the stone used by the 
hme-burner, and the sand employed by the glass-blower, are no 
part of their respective consumption, wherever they have cost 
them Hothing. 

A saving of productive agency, whether of industry, of land, 
or of capital, is equally real and effectual, as a saving of raw ma- 
terial ; and it is practicable in two ways ; either by making the 

* One of the suite of Lord Macartney estimated the saving of grain in 
China, by this method alone, to be equal to the supply of the whole popula- 
tion of Great Britain. . 



356 ON CONSUMPTION. book m. 

same productive means yield more agency ; or by obtaining the 
same result from a smaller quantity of productive means. 

Such savings generally operate in a very short time to the be- 
nefit of the community at large ; they reduce the charges of pro- 
duction ; and, in proportion as the economical process becomes 
better understood, and more generally practised, the competition 
of producers brings the price of the product gradually to a level 
with the charges of production. But, for this very reason, all, 
who do not learn to economize like their neighbours, must neces- 
sarily lose, while others are gaining. Manufacturers have been 
ruined by hundreds, because they would go to work in a grand 
style with too costly and complex an apparatus, provided of 
course at an excessive expense of capital. 

Fortunately, in the great majority of cases, self-interest is 
most sensibly and immediately affected by a loss of this kind; and 
in the concerns of business, like pain in the human frame, gives 
timely warning of injuries, that require care and reparation. If 
the rash or ignorant adventurer in production were not the first 
to suffer the punishment of his own errors or misconduct, we 
should find it far more common than it is to dash into improvident 
speculation; which is quite as fatal to public prosperity, as profu- 
sion and extravagance. A' merchant, that spends 50,000 /r. in 
the acquisition of 30,000 /r., stands, in respect to his private 
concerns and to the general wealth of the community, upon 
exactly the same footing, as a man of fashion, who spends 20,000 
fr. in horses, mistresses, gluttony, or ostentation ; except, per- 
haps, that the latter has more pleasure and personal gratification 
for his money.* 

What has been said on this subject in Book I. of this work, 
makes it needless to enlarge here on the head of productive 
consumption. I shall, therefore, henceforward direct my reader's 
attention to the subject of unproductive consumption, its motives, 
and consequences ; premising, that in what I am about to say^ 
the word, consumption, used alone, will import unproductive con- 
sumption, as it does in common conversation. 

* There is almost insuperable difficulty in estimating with precision the 
consumption and production of value ; and individuals have no other means 
of knowing, whether their fortune be increased or diminished, except by 
keeping regular accounts of their receipt and expenditure ; indeed, all pru- 
dent persons are careful to do so, and it is a duty imposed 'by law in the 
case of traders. An adventurer could otherwise scarcely know whether 
his concern were gainful or losing, and might be involving himself and his 
creditors in ruin. Besides keeping regular accounts, a prudent manager 
will make previous estimates of the value that will be absorbed in the con- 
cern, and of its probable proceeds ; the use of which, like that of a plan or 
design in building, is to give an approximation, though it can afford no cer- 
tainty. 



CHAP. IV. ON CONSUMPTION. 357 

CHAPTER IV. 

OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL. 

Having just considered the nature and effect of consumption 
in general, as well as the general effect of productive consump- 
tion in particular, it remains only to consider in this, and the fol- 
lowing chapters, such consumption as is effected with no other 
erid' or object in view, than the mere satisfaction of a want, or the 
enjoyment of some pleasurable sensation. 

Whoever has thoroughly comprehended the nature of consump- 
tion and production, as displayed in the preceding pages, will have 
a.rrived at the conviction, that no consumption, of the class deno- 
minated unproductive, has any ulterior effect, beyond the satisfac- 
tion of a want by the destruction of existing value. It is a mere 
exchange of a portion of existing wealth on the one side, for hu- 
man gratification on the other, and nothing more. Beyond this, 
what can be expected?— ^reproduction? how can the same identi- 
cal utility be afforded a second time? Wine can not be both 
drunk and distilled into brandy too. Neither can the object 
consumed serve to establish a fresh demand, and thus indirectly 
to stimulate future productive exertion ; for it has already been 
explained that the only effectual demand is created by the pos- 
session of wherewithal to purchase, — ^^of something to give in 
exchange; and what can that be, except a product, which, before 
the act of exchange and consumption, must have been an item, 
either of revenue or of capital? The existence and intensity of 
the demand must invariably depend upon the amount of revenue 
and of capital, the bare existence of revenue and of capital is all 
that is necessary for the stimulus of production, which nothing 
else ca_n stimulate. The choice of one object of consumption 
necessafify precludes that of another ; what is consumed in the 
shape of silks can not be consumed in the shape of linens or 
woollens; nor can what has once been devoted to 'pleasure or 
amusement be made productive also of more positive or substan- 
tial utility. 

Wherefore, the sole object of inquiry, with regard to unproduc- 
tive consumption, is, the degree of gratification resulting from the 
act of consumption itself; and this inquiry will, in the remainder 
of this chapter, be pursued in respect of unproductive consump- 
tion in general, after which we shall give in the following chap- 
ters, a separate consideration to that of individuals, and that of 
the public, or community at large. The sole point is, to weigh 
the loss, occasioned to the consumer by his consumption, against 
the satisfaction it affords him. The degree of correctness, with 



358 ON CONSUMPTION. book hi. 

which the balance of loss and gain is struck, will determine 
whether the consumption be judicious or otherwise ; which is a 
point that, next to the actual production of wealth, has the most 
powerful influence upon the well or ill-being of families and of 
nations. 

In this point of view, the most judicious kinds of consumption 
seem to be : — 

1. Such as conduce to the satisfaction of positive wants ; by 
which term I mean those, upon the satisfaction of which depends 
the existence, the health, and the contentment of the generality of 
mankind ; being the very reverse of such, as are generated by 
refined sensuality, pride, and caprice. Thus, the national con- 
sumption will, on the whole, be judicious, if it absorb articles ra- 
ther of convenience than of display ; the more linen and the less 
lace ; the more plain and wholesome dishes, and the fewer dain- 
ties ; the more warm clothing, and the less einbroidery, the bet- 
ter. In a nation whose consumption is so directed, the public 
establishments will be remarkable rather for utility than splendour, 
its hospitals will be less magnificent than salutary and extensive ; 
its roads well furnished with inns, rather than unnecessarily wide 
and spacious, and its towns well paved, though with few palaces 
to attract the gaze of strangers. 

The luxury of ostentation affords a much less substantial and 
solid gratification, than the luxury of comfort, if I may be allowed 
the expression. Besides, the latter is less costly, that is to say, 
involves the necessity of a smaller consumption ; whereas the 
former is as insatiable ; it spreads from one to another, from the 
mere proneness to imitation ; and the extent to which it may 
reach, is absolutely unlimited, (a) " Pride^" says Franklin, "is 
a beggar quite as clamorous as want, but infinitely more insa- 
tiable." 

Taking society in the aggregate, it will be found that, one with 
another, the gratification of real wants, is more important to the 
community, than the gratification of artificial ones. The wants 
of the rich man occasion the production and consumption of an 
exquisite perfume perhaps, those of the poor man, the production 
and consumption of a good warm winter cloak ; supposing the 
value to be equal, the diminution of the general wealth is the same 



(a) It is strange, that so acute a writer should not have perceived, that 
the mischief of pure individual vanity can never be very formidable, be- 
cause the pleasure it affords loses in intensity, in proportion to its diffiision. 
Indeed, as far as individual consumption is concerned, attacks upon luxury 
are mere idle declamations ; for the productive energies of mankind will 
always be directed towards an object, with a force, and in a degree, propor- 
tionate to the intensity of the want for it. It is the extravagance of public 
luxury alone that can ever be formidable ; this, as well as public consump- 
tion of every kind, it is always the interest of the community at large to 
contract, and that of public functionaries to expand, to the utmost. T. 



CHAP. IV. ON CONSUMPTION. 359 

in both cases ; but the resulting gratification will, in the one case, 
be trifling, transient, and scarcely perceptible ; in the other, 
sohd, ample, and of long duration.* 

2. Such as are the most gradual, and absorb products of the 
best quality. A nation or an individual, will do wisely to direct 
consumption chiefly to those articles, that are the longest time 
in wearing out, and the most frequently in use. Good houses 
and furniture are, therefore, objects of judicious preference; for 
there are few products that take longer time to consume than a 
house, or that are of more frequent utility ; in fact, the best part 
of one's life is passed in it. Frequent changes of fashion are 
unwise; for fashion takes upon itself to throw things away long 
before they hav^e lost their utility, and sometimes before they 
have lost even the freshness of novelty, thus multiplying con- 
sumption exceedingly, and rejecting as good for nothing what is 
perhaps still useful, convenient, or even elegant. So that a rapid 
succession of fashions impoverishes a state, as well by the con- 
sumption it occasions, as by that which it arrests. 

There is an advantage inconsurning articles of superior quali- 
ty, although somewhat dearer, and for this reason: in every kind 
of manufacture, there are some charges that are always the 
same, whether the product be of good, or bad quality. Coarse 
linen will have cost, in weaving, packing, storing, retailing, and 
carriage, before it comes to the ultimate consumer, quite as 
much trouble and labour, as linen of the finest quality ; there- 
fore, in purchasing an inferior quality, the only saving, is the 
cost of the raw material; the labour and trouble must always be 
paid in full, and at the same rate; yet the product of that labour 
and trouble are much quicker consumed, when the linen is of in- 
ferior, than when it is of superior quality. 

This reasoning is applicable indifferently to every class of pro- 
duct; for in every one there are some kinds of productive agency, 
that are paid equally without reference to quality; and that 
agency is more profitably bestowed in the raising of products of 
good than of bad quality; therefore, it is generally more advan- 
tageous for a nation to consume the former. But this can not be 
done, unless the nation can discern between good and bad, and 
have acquired taste for the former; wherein again appears the 
necessity of knowledge| to the furtherance of national prosperi- 
ty; and unless, besides, the bulk of the population, be so far re- 
moved above penury, as not to be obhged to buy whatever is 
the cheapest in the first instance, although it be in the long run 
the dearest to the consumer. 

* The lending at interest what might have been spent in frivolity is of 
this latter class ; for interest can not be paid, unless the loan be productively 
employed ; in which case it will go in part to the maintenance of the la- 
bouring classes. 

+ By knowledge I would always be understood to mean, acquaintanca 
with the true state of things, or generally with truth in every branch. 



360 ON CONSUMPTION. book in. 

It is evident, that the interference of pubhc authority in regu- 
lating the details of the manufacture, supposing it to succeed in 
making the manufacturer produce goods of the best quality, which 
is very problematical, must be quite ineffectual in promoting 
their consumption; for it can give the consumer, neither the 
taste of what is of the better quality, nor the ability to purchase. 
The difficulty lies, not in finding a producer, but in finding a con- 
sumer. It will be no hard matter to supply good and elegant 
commodities, if there be consumers both willing and able to pur- 
chase them. But such a demand can exist only in nations en- 
joying comparative affluence; it is affluence, that both furnishes 
the means of buying articles of good quality, and gives a taste 
for them. Now the interference of authority is not the road to 
affluence, which results from activity of production, seconded by 
the spirit of frugality ; — from habits of industry pervading every 
channel of occupation, and of frugality tending to accumulation 
of capital. In a country, where these qualities are prevalent, 
and in no other can individuals be at all nice or fastidious in 
what they consume. On the contrary, profusion and embarrass- 
ment are inseparable companions; there is no choice when ne- 
cessity drives. 

The pleasures of the table, of play, of pyrotechnic exhibitions, 
and the like, are to be reckoned amongst those of shortest dura- 
tion. I have seen villages, that, although in want of good water, 
yet do not hesitate to spend in a wake or festival, that lasts but 
one day, as much money as would suffice to construct a conduit 
for the supply of that necessary of life, and a fountain or public 
cistern on the village green; the inhabitants preferring to get once 
drunk in honour of the squire or saint, and to go day after day 
with the greatest inconvenience, and bring, muddy water from 
half a league distance. The filth and discomfort prevalent in 
rustic habitations are attributable, partly to poverty, and partly to 
injudicious consumption. 

In most countries, if a part of what is squandered in frivolous 
and hazardous amusements, whether in town or coun'ry, were 
spent in the embellishment and convenience of the habitations, 
in suitable clothing, in neat and useful furniture, or in the in- 
struction of the population, the whole community would soon as- 
sume an appearance of improvement, civilization, and affluence, 
infinitely more attractive to strangers, as well as more gratifying 
to the people themselves. 

3. The collective consumption of numbers. There are some 
kinds of agency, that need not be multiplied in proportion to the 
increased consumption. One cook can dress dinner for ten as 
easily as for one; the same grate will roast a dozen joints as 
well as one ; and this is the reason, why there is so much econo- 
my in the mess-table of a college, a monastery, a regiment, or a 



CHAP. IV. ON CONSUMPTION. 361 

large manufactory, in the supply of great numbers from a com- 
mon kettle or kitchen, and in the dispensaries of cheap soups. 

4. And lastly, on grounds entirely different, those kinds of 
consumption are judicious, which are consistent with moral rec- 
titude; and, on the contrary, those, which infringe its laws, ge- 
nerally end in public, as well as private calamity. But it would 
be too wide a digression from my subject to attempt the illustra- 
tion of this position. 

It is observable, that great inequality of private fortune is hos- 
tile to those kinds of consumption, that must be regarded as most 
judicious. In proportion as that inequality is more marked, the 
artificial wants of the population are more numerous, the real 
ones more scantily supplied, and rapid consumption more com- 
mon and destructive. The p-atrician spendthrifts and imperial 
gluttons of ancient Rome thought they never could squander 
enough. Besides, immoral kinds of consumption are infinitely 
more general, where the extremes of wealth and poverty are 
found blended together. In such a state of society, there are a 
few, who can indulge in the refinement of luxury, but avast num- 
ber, who look on their enjoyments with envy, and are ever impa- 
tient to imitate them. To get into the privileged class is the 
grand object, be the means ever so questionable; and those who 
are little scrupulous in the acquiremei)-t, are seldom more so in 
the employment of wealth, (a) 

The government has, in all countries, a vast influence, in de- 
termining the character of the national consumption; not only 
because it absolutely directs the consumption of the state itself, 
but because a great proportion of the consumption of individuals 
is guided by its will and example. If the government indulge a 
taste for splendour and ostentation, splendour and ostentation 
will be the order of the day, with the whole host of im.itators ; and 
even those of better judgment and discretion must, in some mea- 
sure, yield to the torrent. For, how seldom are they indepen- 
dent of that consideration and good opinion, which, under such 
circumstances, are to. be earned, not by personal qualities, but 
by a course of extravagance they can not approve? 



(a) In a wholesome state of society, when public institutions are not 
needlessly multiplied, and all tend to the common purpose of public good, 
this very impatience and anxiety is conducive to the welfare, and not to 
the injury, of society. Indeed, great inequality of fortune seems to be a 
necessary accompaniment to social wealth and great national productive 
power. It is the prospect of great prizes only, that can stimulate to the 
extreme of intellectual and corporeal industry; and there is no instance on 
record of a nation far advanced in industry, in which great inequality of 
fortune has not existed. One bishopric of Durham will tempt more cleri- 
cal adventurers, than five hundred moderate benefices;- and the example of 
a single Arkwright or Peele will stimulate manufacturing science and ac- 
tivity, more than a whole Manchester of moderate cotton-spinning con- 
cerns. T. 

54 



362 ON CONSUMPTION. book iir. 

First and foremost in the list of injudicious kinds of consump- 
tion stand those which yield disgust and displeasure, in lieu of 
the gratification anticipated. Under this class may be ranged, 
excess and intemperance in private individuals; and, in the state, 
wars undertaken with the motive of pure vengeance, like that of 
Louis XIV., in revenge for the attacks of a Dutch newspaper, 
or with that of empty glory, which leads commonly to disgrace 
and odium. Yet such wars are even less to be deplored for the 
waste of national wealth and resources, than for the irremediable 
loss of personal virtue and talent sacrificed in the struggle; a 
loss which involves families in distress enough, when exacted by 
the pubhc good, and by the pressure of inexorable necessity; 
but must be doubly shocking and afflicting, when it originates in 
the caprice, the wickedness, the folly, or the ungovernable pas- 
sions of national rulers. 



CHAFTEHV. . 

OF INDIVIDUAL CONSUMPTON ITS MOTIVES AND ITS EFFECTS. 

The consumption of individuals, as contrasted with that of the 
public or community at large, is such as is made with the object 
of satisfying the wants of families and individuals. These wahts 
chiefly consist in those of food, raiment, lodging, and amusement. 
They are supplied with the necessary articles of consumption in 
each department, out of the respective revenue of each family or 
individual, whether derived from personal industry, from capital, 
or from land. The wealth of a family advances, declines, or re- 
mains stationary, according as its consumption equals, returns, 
or falls short of its revenue. The aggregate of the consumption 
of all the individuals, added to that of the government for public 
purposes, forms the grand total of national .consumption. 

A family, or indeed a community, or nation, may certainly 
consume the whole of its revenue, without being thereby impo- 
verished ; but it by no means follows, that it either must, or would 
act wisely, in so doing. Common prudence would counsel to 
provide against casualties. Who can say with certainty, that his 
income will not fall otf, or-that his fortune is exempt from the in- 
justice, the fraud, or the violence of mankind 1 Lands may be 
confiscated; ships may be wrecked ; litigation may involve him 
in its expenses and uncertainties. The richest merchant is lia- 
ble to be ruined by one unlucky speculation, or by the failure of 
others. Were he to spend his whole income, his capital might, 
and in all probability would, be continually on the decline. 

But, supposing it to remain stationary, should one be content 



CHAP. V. ON CONSUMPTION. 363 

with keeping it so? A fortune, however large, will seem little 
enough, when it comes to be divided amongst a number of chil- 
dren. And, even if there be no occasion to divide it, what harm 
is there in enlarging it; so it be done by honourable means'? 
what else is it, but the desire of each individual to better his si- 
tuation, that suggests the frugality that accumulates capital, and 
thereby assists the progress of industry, and leads to national 
opulence and civilization? Had not previous generations been 
actuated by this stimulus, the present one would now be in the 
savage state: and it is impossible to say, how much farther it 
may yet be possible to carry civilization. It has never been 
proved to my satisfaction, that nine-tenths of the population must 
inevitably remain in that degree of misery and semi-barbarism, 
which they are found in at present in most countries of Europe. 

The observance of the rules of private economy keeps the 
consumption of a family within reasonable bounds: that is to say, 
the bounds prescribed in each instance by a judicious compari- 
son of the value sacrificed in consumption, with the satisfaction it 
affords. None but the individual himself, can fairly and correct- 
ly estimate the loss and the gain, resulting to himself or family 
from each particular act of consumption; for the balance will de- 
pend upon the fortune, the rank, and the wants of himself and 
family; and, in some degree, perhaps, upon personal taste and 
feelings. To restrain consumption within too narrow limits, 
would involve the privation of gratification, that fortune has 
placed within reach ; and, on the other hand, a too profuse con- 
sumption might trench upon resources, that it might be but com- 
mon prudence to husband.* 

Individual consumption has constant reference to the charac- 
ter and passions of the consumer. It is influenced alternately by 
the noblest and the vilest propensities of our nature; at one time 
it is stimulated by sensuality; at another by vanity, by generosi- 
ty, by revenge, or even by covetousness. It is checked by pru- 
dence or foresight, by groundless apprehension, by distrust, or 
by selfishness. As these various qualities happen in turn to pre- 
dominate, they direct mankind in the use they make of their 

* On this ground sumptuary laws are superfluous and unjust. The in- 
dulgence proscribed is either within the means of the individual or not : in 
tiie former case, it is an act of oppression to prohibit a gratification involv- 
ing no injury to others, equally tinjustifiable as prohibition in any other par. 
ticular ; in the latter, it is at all events nugatory to do so ; for there is no 
occasion for legal interference, where pecuniary circumstances alone are an 
effectual bar. Every irregularity of this kind works its own punishment. 
It has been said, that it is the duty of the government to check those ha- 
bits, which have a tendency to lead people into expenses exceeding their 
means, but it will be found, that such habits can only be introduced by the 
example and encouragement of the public authorities themselves. In all 
other circumstances, neither custom nor fashion will ever lead the different 
classes of society into any expenses, but what are suitable to their respec- 
tive means. 



364 ON CONSUMPTION. book iii. 

wealth. In this, as in every other action of life, the line of true 
wisdom is the most difficult to observe. Human infirmity is per- 
petually deviating to the one side or the other, and seldom steers 
altogether clear of excess.* 

In respect to consumptidri', prodigality and avarice are the two 
faults to be avoided: both of them neutralize the benefits that 
wealth is calculated to confer on its possessor; prodigality by 
exhausting, avarice by not using, the means of enjoyment. Pro- 
digality is, indeed, the more amiable of the two, because it is al- 
lied to many amiable and social qualities. It is regarded with 
more indulgence, because it imparts its pleasures to others; yet 
it is of the two the more mischievous to society; for it squan- 
ders and makes away with the capital that should be tlie support 
of industry; it destroys industry, the grand agent of production, 
by the destruction of the other agent, capital. If, by expense 
and consumption, are meant those kinds only which minister to 
our pleasures and luxuries, it is a great mistake to say that mo- 
ney is good for nothing but to be spent, and that products are 
only raised to be consumed. Money may be employed in the 
work of reproduction; w-hen so employed it must be productive 
of great benefit; and, every time that a fixed capital is squander- 
ed, a corresponding quantity of industry must be extinguished, 
in some quarter or other. The spendthrift, in running through 
his fortune, is at the same time exhausting, pro tanio, the source 
of the profits upon industry. 

The miser, who, in the dread of losing his money, hesitates to 
turn it to account, does, indeed, nothing to promote the progress 
of industry; but at least he can not be said to reduce, the' means 
of production. His hoard is scraped together by the abridgment 
of his personal gratifications, not at the expense of the public, 
according to the vulgar notion ; it has been withdrawn from no 
productive occupation, and will at any rate re- appear at his death, 
and be available for tlie purpose of extending the operations of 
industry, if it be not squandered by his heirs, or so eflJectually 
concealed, as to evade all search or recovery. . 

It is absurd in spendthrifts to boast of their prodigality, which 
is quite as unworthy the nobleness of our nature, as the sordid 
meanness of the opposite character. There is no merit in con- 
suming all one can lay hands upon, and desisting only when one 
can get no more to consume; every animal can do as much; 
nay, there are some animals that set a better example of provi- 
dent management. It is more becoming the character of a be- 
ing gifted with reason and foresight, never to consume, in any 
instance, without some reasonable object in view. At least, this 
is the course that economy would prescribe. 

* The weaker sex is, from the very circumstance of inferiority in strength 
of mind, exposed to greater excess both of avarice and prodigality. 



CHAP. V. ON CONSUMPTION. 365 

In short, economy is nothing more than the direction of hu- 
man consumption "with judgment and discretion, — the know- 
ledge of our means, and of the best mode of employing them. 
There is no fixed rule of economy ; it must be guided by a re- 
ference to the fortune, condition, and wants of the consumer. An 
expense, that may be authorized by the strictest economy in a 
person of moderate fortune, would, perhaps, be pitiful in a rich 
man, and absolute extravagance in a poor one. In a state of 
sickness, a man must allow himself indulgences, that he would 
not think of in health. An act of beneficence, that trenches on 
the personal enjoyments of the benefactor, is deserving of the 
highest praise; but it would be highly blamable, if done at the 
expense of his children's subsistence. 

Economy is equally distant from avarice and profusion. Ava- 
rice hoards, not for the purpose of consuming or reproduc- 
ing, but for the mere sake of hoarding ; it is a kind of instinct, 
or mechanical impulse, much to the discredit of those in whom 
it is detected ; whereas, true economy is the offspring of pru- 
dence and sound reason, and does not sacrifice necessaries 
to superfluities, like the miser, when he denies himself pre- 
sent comforts, in the view of luxury, ever prospective and 
never to be enjoyed. The most sumptuous entertainment may 
be conducted with economy, without diminishing, but rather add- 
ing to its splendour, which the slightest appearance of avarice 
would tarnish and deface. The economical man balances his 
means against his present or future wants, and those of his fa- 
mily and friends, not forgetting the calls of humanity. The miser 
regards neither- family nor friends ; scarcely attends to his own 
personal wants, and is an utter stranger to those of mankind 
at large. Economy never consumes without an object ; ava- 
rice never willingly consumes at all; the one is a sober and 
rational study, the only one that supphes the means of fulfil- 
ling our duties, and being at the same time just and generous; 
the other a vile propensity to sacrifice every thing to the sor- 
did consideration of self. 

Economy has not unreasonably been ranked among the vir- 
tues of mankind ; for, like the other virtues, it imphes self-com- 
mand and control ; and is productive of the happiest conse- 
quences ; the good education of children, physical and moral; 
the careful attendance of old age ; the calmness of mind, so ne- 
cessary to the good conduct of middle life ; and that indepen- 
^ience of circumstances which alone can secure against merce- 
nary motives, are all referable to this quality. Without it, there 
can be no liberality, none at least of a permanent and whole- 
some kind ; for, when it degenerates into prodigality, it is an 
indiscriminate largess, alike to deserving and undeserving ; stint- 
ing those who have claims in favour of those who have none. 
It is common to see the spendthrift reduced to beg a favour 



366 ON CONSUMPTION. book m, 

from people that he has loaded with his bounty ; for what he 
gives now, one expects a return will some day be called for ; 
whereas, the gifts of the economical man are purely gratui- 
tous ; for he never gives except from his superfluities. The 
latter is rich with a moderate fortune; but the miser and the 
prodigal are poor, though in possession of the largest resources. 

Economy is inconsistent with disorder, which stumbles blind- 
fold over wealth, sometimes missing what it most desires, al- 
though close within its reach, and sometimes seizing and de- 
vouring what it is most interested in preserving ; even impelled 
by the occurrences of the moment, which it either can not fore- 
see, or can not emancipate itself from ; and always unconscious 
of its own position, and utterly incapable of choosing the pro- 
per course for the future. A household, conducted without order, 
is preyed upon by all the world : neither the fidelity of the 
servants, nor even the parsimony of the master, can save it 
from ultimate ruin. For it is exposed to the perpetual recur- 
rence of a variety of little outgoings, on every occasion, how- 
ever trivial.* 

Among the motives that operate to determine the consumption 
of individuals, the most prominent is luxury, that frequent theme 
of declamation, which, however, I should probably not have 
dwelt upon, could I expect that every body will take the trouble 
of applying the principles I have been labouring to establish ; and 
were it not always useful to substitute reason for declamation. 

Luxury has been defined to be, the use of superfluities.']" For 
my own part, I am at a loss to draw the line between superflui- 

* I remember being once in the country a witness of the numberless mi- 
nute losses, that neglectful housekeeping entails. For want of a trumpery 
latch, the gate of the poultry -yard was for ever open: there being no means 
of closing it externally, it was on the swing every time a person went out ; 
and many of the poultry were lost in consequence. One day, a fine young 
porker made his escape into the woods, and the whole family, gardener, 
cook, milk-maid, (fee, presently turned out in quest of the fugitive. The 
gardener was the first to discover the object of pursuit, and, in leaping a 
ditch to cut oflfhis further escape, got a sprain that confined him to his bed 
for the next fortnight ; the cook found the linen burnt, that she had left 
hung up before the fire to dry ; and the milk-maid, having forgotten in her 
haste to tie up the cattle properly in the cow-house, one of the loose cows 
had broken the leg of a colt that happened to be kept in the same shed. — 
The linen burnt, and the gardener's work lost, were worth full 20 crowns; 
and the colt about as much more : so that here was a loss in a few minutes 
of 40 crowns, purely for want of a latch, that might have cost a few sous at 
the utmost ; and this in a household where the strictest economy was ne- 
cessary, to say nothing of the suffering of the poor man, or the anxiety and 
other troublesome incidents. The misfortune was to be sure not very se- 
rious, nor the loss very heavy ; yet, when it is considered, that similar- ne- 
glect was the occasion of repeated disasters of the same kind, and ultimate- 
ly of the ruin of a worthy family, it was deserving of some little attention. 

t Steuart, Essay on Pol. Econ. book ii. c. 20. The same writer has in 
another passage observed, that every thing not absolutely necessary to bare 
existence is a superfluity. 



CHAP. V. ON CONSUMPTION 367 

ties and necessaries ; the shades of difference are as indistinct 
and completely blended as the colours of the rainbow. 

Taste, education, temperament, bodily health, make the de- 
grees of utility and necessity infinitely variable, and render it im- 
possible to employ, in an absolute sense, terms, which always of 
necessity convey an idea of relation and comparison. 

The line of demarcation between necessaries and superfluities 
shifts with the fluctuating condition of society. Strictly speak- 
ing, mankind might exist upon roots and herbs, with a sheepskin 
for clothing, and a wigwam for lodging; yet, in the present state 
of European society, we cannot look upon bread or butcher's 
meat, woollen-clothes or houses of masonry, as luxuries. For the 
same reason, the hne varies also according to the varying circum- 
stances of individual fortune; what is a necessary in a large town, 
or in a particular line of life, may, in another line of life, or in the 
country, be a mere superfluity. Wherefore, it is impossible 
exactly to define the boimdary between the one and the other. 
Smith has fixed it a little in advance of Steuart ; including in 
the rank of necessaries, besides natural wants, such as the esta- 
blished rules of decency and propriety have made necessary 
in the lower classes of societyi But Smith was wrong in at- 
tempting to fix at all what must, in the nature of things, be ever 
varying. 

Luxury may be said, in a general way, to be, the use or con- 
sumption of dear articles ; for the term dear is one of relation, 
and, therefore, may be properly enough applied in the definition 
of another term, whose sense is likewise relative. Luxury* with 
us in France conveys the idea rather of ostentation than of sen- 
suality ; applied to dress, it denotes rather the superior beauty 
and impression upon the beholder, than superior convenience and 
comfort to the wearer ; applied to the table, it means rather the 
splendour of a sumptuous banquet, than the exquisite fare of the 
solitary epicure. The grand aim of luxury in this sense is to 
attract admiration by the rarity, the costliness, and the miagnifi- 
cence of the objects displayed, recommended probably neither 
by utility, nor convenience, nor pleasurable qualities, but merely 
by their dazzling exterior and effect upon the opinions of man- 
kind at large. Luxury conveys the idea of ostentation ; but os- 
tentation has itself a far more extensive meaning, and compre- 
hends every quality assumed for the purpose of display. A man 
may be ostentatiously virtuous, but is never luxuriously so ; for 
luxury implies expense. Thus, luxury of wit or genius is a me- 
taphorical expression, implying a profuse display or expenditure, 
if it may be so called, of those qualities of the intellect, which it 
is the characteristic of good taste to deal out with a sparing hand. 

* The English term luxury has a much more sensual meaning than the 
French luxe, and seems to comprise both luxe and luxure, the luxus, or 
luxuria, and luxuries of the Latin writers. 



368 ON CONSUMPTION. book m. 

Although, with us in France, what we term luxury is chiefly 
directed to ostentatious indulgence, the excess and refinement 
of sensuality are equally unjustifiable, and of precisely similar 
effect; that is to say, of a frivolous and inconsiderable enjoyment 
or satisfaction, Jil)tained by a large consumption, calculated to 
satisfy more urgent and extensive wants. But I should not stig- 
matize as luxury that degree of variety or abundance, which a 
prudent and well informed person in a civilized community would 
like to see upon his table upon domestic and common occasions, 
or aim at in his dress and abode, when under no compulsion to 
keep up an appearance. I should call this degree of indulgence 
judicious and suitable to his condition, but not an instance, of 
luxury. 

Having thus defined the terrn luxury, we may go on to inves- 
tigate its effect upon the well-ordermg or economy of nations. 

Under the head of unproductive consumption is comprised the 
satisfaction of many actual and urgent Wants, which is a purpose 
of sufficient consequence to outweigh the mischief, that must en- 
sue from the destruction of values. But what is there to com- 
pensate that mischief, where such consumption has not for its 
object the satisfaction of such wants? where money is spent for 
the mere sake of spending, and value destroyed without any ob- 
ject beyond its destruction? 

It is supposed to be beneficial, at all events, to the producers 
of the articles consumed. But it is to be considered, that the 
same expenditure must take place, though not, perhaps, upon 
objects quite so frivolous ; for the money withheld from luxurious 
indulgences is not absolutely thrown into the sea; it is sur.e to be 
spent either upon more judicious gratifications or upon reproduc- 
tion. In one way or other, all the revenue, not absolutely sunk 
or buried, is consumed by the receiver of it, or by some one in 
his stead ; and in all cases whatever, the encouragement held 
out by consumption to the producer is co-extensive with the total 
amount of revenue to be expended. Whence it follows : 

1. That the encouragement which ostentatious extravagance 
affords to one class of production is necessarily withdrawn from 
another. 

2. That the encouragement resulting from this kind of con- 
sumption can not increase, except in the event of an increase in 
the revenue of the consumers; which revenue, as we can not but 
know by this time, is not to be increased by luxurious, but solely 
by reproductive consumption. 

How great, then, must be the mistake of those, who, on ob- 
serving the obvious fact, that the production always equals the 
consumptiotl, as it must necessarily do, since a thing can not be 
consumed before it is produced, have confounded the cause with 
the effect, and laid it down as a maxim, that consumption origi- 
nates production ; therefore, that frugality is directly adverse to 



CHAP. V. ON CONSUMPTION. 369 

public prosperity, and that the most useful citizen is the one who 
spends the most. 

The partisans of the two opposite systems above adverted to, 
the economists, and the advocates of exclusive commerce, or the 
balance of trade, have made this maxim a fundamental article of 
their creed. The merchants and manufacturers, who seldom 
look beyond the actual sale of their pi-oducts, or inquire into the 
causes, which may operate to extend their sale, have warmly 
supported a position, apparentlyso consistent with their interests; 
the poets, who are ever apt to be .seduced by appearances, and 
do not consider themselves bound to be wiser than politicians and 
men of business, have been loud in the praise of luxury;* and the 
rich have not been backward in adopling principles, that exalt 
their ostentation into a virtue, and their self-gratitication into be- 
neficence, "f" 

This prejudice, however, must vanish, as the increasing know- 
ledge of political economy begins to reveal the real sources of 
wealth, the means of production, and the effect of consumption. 
Vanity rhay take pride in idle expense, but will ever be held in no 
less contempt by the wise, on account of its pernicious effects, 
than it has been all along, for the motives by which it is actuat- 
ed. 

These conclusions of theory have been confirmed by experi- 
ence. Misery is the inseparable companion of luxury. The man 
of wealth and ostentation squanders upon costly trinkets, sump- 
tuous repasts, magnificent mansions, dogs, horses, and mistresses, 

* Though it is not every subject that allows equal scope to poetical ge- 
nius, it does not seem, that error affords a finer field than truth. The lines 
of Voltaire on the system of the world, and on the discoveries of Newton 
regarding the properties of light, are strictly conformable to the rules of 
science, and nowise inferior in beauty to those of Lucretius on the fanciful 
dogmas of the Epicurean school. But if Voltaire had been better acquainted 
with the principles of political economy, he would never have given utter- 
ance to such sentiments as the following : 

Sachez surtout que le luxe enrichit 
Un grand ^tat, s'il en perd un petit. 
Cette splendeur, cette pomps mondaine, 
Dhm regneheureux est la marque certain. 
Le riche est ne pour beaucoup depenser . . .' . 

The progress of science comjDels those, who covet literary fame, to make 
themselves acquainted with general principles at fhe least; without a close 
adherence to truth and nature, there is little chance of permanent reputa- 
tion, even in the poetical department. 

t La Repuhlique a. Men affaire ■ 
De Gens, qui ne depensent Hen ; ■ 

Je ne sais d^homme necessaire. 
Que celui dont le luxe epand beaucoup de bien. 

La Fontaine, Avantage de la Science. 
"Were the rich not to spend their money freely," says Montesquieu, 
" the poor would starve." Esprit des Lois, liv. vii. c. 4. 

55 



370 ON CONSUMPTION. book in. 

a portion of value, which, vested in productive occupation, would 
enable a multitude of willing labourers, whom bis extravagance 
now consigns to idleness and misery, to provide themselves with 
warm clothing, nourishing food, and household conveniences. 
The gold buckles of the rich man leave the poor one without 
shoes to his feet ; and the labourer will want a shirt to his back, 
while his rich neighbour glitters in velvet. and embroidery. 

It is vain to resist the nature of things. Magnificence may do 
what it will to keep poverty out of sight, yet it will cross it at ev- 
ery turn, still haunting, as if to reproach it for its excesses. This 
contrast was to be met with at Versailles, at Rome, at Madrid, 
and in every seat of royal residence. In a recent instance, it 
occurred in France in an afflicting degree, after a long series of 
extravagant and ostentatious administration ; yet the principle is 
so undeniable, that one would not suppose- it had required so ter- 
rible an illustration.* 

Those who are little in the habit of looking through the ap- 
pearance to the reality of things, are apt to be seduced by the 
glitter and the bustle of ostentatious luxury.' They take the dis- 
play of consumption as conclusive evidence of national prosperi- 
ty. If they could open their eyes, they would see, that a nation 
verging towards decline vvill for some time continue to preserve 
a show of opulence ; like the establishment of a spendthrift on 
the high road to ruin. But this false glare can not last long: the 
effort dries up the sources of reproduction, and, therefore, must 
infallibly be followed by a state of apathy and exhaustion of the 

* There are other circumstances, that contribute to veil the residence of 
the court in an atmosphere of human misery. It is tliere, that personal 
service is consumed by wholesale ; and that is of all things the most rapidly 
consumed, being, indeed, consumed as fast as produced. Under this deno- 
mination, is to be comprised the agency of the soldiery, of menial servants, 
of public functionaries, whether useful or not, of clerks, lawyers, judges, 
civilians, ecclesiastics, actors, musicians, drolls, and nimierous other hang- 
ers-on, who all crowd tovi'ards the focus of power and occupation, civil, ju- 
dicial, military, or religious. It is there also, that material products seem 
to be more wantonly consumed. The clioicest viands, the most beautiful 
and costly stuffs, the rarest works of art and fashioai, all seem emulous to 
reach tliis general sink, whence little or nothing ever emerges. 

Yet, if the accunrulated values, that are drained from every quarter of 
the national territory to feed the consumption of the seat of royalty, were 
distributed with any regard to equity, tliey would probably suffice to main- 
tain all classes in comfort and plenty. Thougli such drains must always be 
calamitous, because they absorb value, and yield no return, at any rate the 
local population might be pretty well off ; but it is notorious that wealth is 
no where less equally diffused. T'he prince, tlie favourite, a mistress, or a 
bloated peculator, takes the lion's share, leaving to the subordinate drones 
the pittance assigned to them by the generosity or caprice of their superiors. 

The residence of an overgrown proprietor upon his estate then only tends 
to diffuse abundance and cheerfulness around him, when his expenditure is 
directed to objects of utility, rather than of pomp ; in which case, lie is real- 
ly an adventurer in agriculture, and an accumulator of capital in the shape 
of improvements and ameliorations. 



CHAP. V. ON CONSUMPTION. 371 

political frame, which is only to be remedied by slow degrees, 
and by the adoption of a regimen the very reverse to that, by 
which it has thus been reduced. 

It is distressing to see the fatal habits and customs of the na- 
tion one is attached to by birth, fortune, and social affection, ex- 
tending their influence over the wisest individuals, and those best 
able to appreciate this danger and foresee its disastrous conse- 
quences. The number of persons, who have sufficient spirit and 
independence of fortune to act up to their principles, and set 
themselves forward as an example, is extremely small. Most 
men yield to the torrent, and rush on ruin with their eyes open, 
in search of happiness ; although it requires a very small share 
of philosophy to see the madness of this course, and to perceive, 
that, when once the common wants of nature are satisfied, hap- 
piness is to be found, not in the frivolous enjoyments of luxurious 
vanity, but in the moderate exercise of our physical and moral 
faculties. 

Wherefore, those, who abuse great power, or talent, by exert- 
ing it in diffusing a taste for luxury, are the worst enemies of so- 
cial happiness. If there is one habit, that deserves more encou- 
ragement than another, in monarchies as well as republics, in 
great as well as small, it is this of economy. Yet, after all, no 
encouragement is wanted; it is quite enough to withdraw favour 
and honour from habits of profusion; to afford inviolable securi- 
ty to all savings and acquirements; to give perfect freedom to 
their investment and occupation in every branch of industry, that 
is not absolutely criminal. 

It is alleged, that, to excite mankind to spend, or consume, is 
to excite them to produce, inasmuch as they can only spend what 
they may acquire. This fallacy is grounded on the assumption, 
that production is equally within the ability of mankind as con- 
sumption; that it is as easy to augment as to expend one's reve- 
nue. But, supposing it were so, nay further, that the desire to 
spend, begets a liking for labour, although experience by no 
means warrants such a conclusion, yet there can be no enlarge- 
ment of production, without an augmentation of capital, which is 
one of the necessary elements of production ; but it is clear, that 
capital can only be accumulated by frugality; and how can that 
be expected from those, whose only stimulus to production is the 
desire of enjoyment? 

Moreover, when the desire of acquirement is stimulated by the 
love of display, how can the slow and limited progress of real 
production keep pace with the ardour of that motive? will it not 
find a shorter road to its object, in the rapid and disreputable 
profits of jobbing and intrigue, classes of industry most fatal to 
national welfare, because they produce nothing themselves, but 
only aim at appropriating a ajiare of the products of other peo- 
ple? It is this motive, that sets in motion the despicable art and 



372 ON CONSUMPTION. book in. 

cunning of the knave, leads the pettifogger to speculate on the 
obscurity of tlie laws, and the man of authority to sell to folly and 
wickedness that patronage, which it is his duty to dispense gra- 
tuitously to merit and to right. Pliny mentions having seen 
Paulina at a supper, dressed in a network of pearls and eme- 
ralds, that cost 40 millions of sesteriii, (1) as she was ready to 
prove by her jeweller's bills. It was bought with the fruit of her 
ancestor's speculations. " Thus," says the Roman writer, "it 
was to dress out his grand-daughter in jewels at an entertain- 
ment, that Lollius forgot himself so far, as to lay waste whole 
provinces, to become the object of detestation to the Asiatics he 
governed, to forfeit the favour of Csesar, and end his litle by poi- 
son." 

This is the kind of industry generated by love of display. 

If it be pretended, that a system, which encourages profusion, 
operates only upon the wealthy, and thus tends to a beneficial 
end, inasmuch as it reduces the evil of the inequality of fortune, 
there can be little difficulty in showing, that profusion in the high- 
er, begets a similar spirit in the middling and lower, classes of 
society, which last must, of' course, the soonest arrive at the 
hmits of their income ; so that, in fact, universal profusion has 
the eflect of increasing, instead of reducing that inequality. Be- 
sides the profusion of the wealthier class is always preceded, or 
followed, by that of the government, which must be fed ^nd sup- 
plied by taxation, that is always sure to fall more heavily upon 
small incomes than on large ones.* 

The apologists of luxury have sometimes gone so far as to 
cry up the advantages of misery and indigence; on the ground, 
that, without the stimulus of want, the lower classes of mankind 
could never be impelled to labour, so that neither the upper 
classes, nor society at large, could have the benefit of their ex- 
ertions. 

Happily, this position is as false in principle as it would be 
cruel in practice. Were nakedness a sufficient motive of exer- 
tion, the savage would be the most diligent and laborious, for he 
is the nearest to nakedness, of his species. Yet his indolence is 
equally notorious and incurable. Savages will often fret them- 
selves to death, if compelled to woik. It is observable throughout 
Europe, that the laziest nations are those nearest approaching to 
the savage state ; a mechanic in good circumstances, at London 

* In favour of luxury, the following paradoxical argument has been ad- 
vanced; for what is too ridiculous to be hazarded in such a cause ? " that, 



(1) [About 140,000 dollars. Some English ladies were jewels of greater 
value; but some read the passage in Pliny Quadringenties, instead of Quad- 
ragies Sestoiium. This would make the" jewels of Paulina worth 1,400,000 
dollars ; the more probable sum.] American Editor. 



CHAP. V. ON CONSUMPTION. 373 

or Paris, would execute twice as much work in a given time, as 
the rude mechaijc of a poor district. Wants muhiply as fast as 
they are satisfied; a nian who has a jacket is for having a coat: 
and, when he has his coat, he must have a great coat too. 
The artisan, that is lodged in an apartment by himself, extends 
his views to a second; if he has two shirts, he soon wants a do- 
zen, for the comforts of more frequent change of linen; whereas, 
if he has none at all, he never feels the want of it. No man 
feels any disinclination to make a further acquisition, in conse- 
quence of having made one already. 

The comforts of the lower classes are, therefore, by no means 
incompatible with the existence of society, as too many have 
maintained. The shoemaker will make quite gs" good shoes in 
a warm room, with a good coat to his back, and wholesome food 
for himself and his family, as when perishing with cold in an 
open stall; he is not less skilful or inclined to work, because he 
has the reasonable conveniences of life. Linen is washed as 
well in EnglandJ where washing is carried on comfortably with- 
in doors, as where it is executed in the nearest stream in the 
neighbourhood. 

It is time for the rich to abandon the puerile apprehension of 
losing the objects of their sensuality, if the poor man's com- 
forts be promoted. On the contrary., reason and experience con- 
cur in teaching, that the greatest variety, abundance, and refine- 
ment of enjoyment are to be found in those countries, where 
wealth abounds most, and is the most widely diffused. 



CHAPTER VI. 

ON PUBLIC CONSUMPTION. 

SECTION I. 

Of the JYature and gemral Effect of Public Consumption. 

Besides the wants of individuals and of families which it is 
the object of private consumption to satisfy, the collection of 

since luxury consumes superfluities only, the objects it destroys are of lit- 
tle real utility, and therefore the loss to society can be but small." There 
is this ready answer: the value of the. objects consumed by luxury must 
have been reduced by the competition of producers to a level with the 
charges of production, wherein are comprised the profits of the producers. 
Objects of luxury are equally the product of land, capital, and industry, 
which might have been employed in raising objects of real utility, had the 
demand taken that direction ; for production invariably accomiriodatea it- 
self to the taste of the consumers. 



374 ON CONSUMPTION. book hi. 

many individuals into a community gives rise to a new class of 
wants, the wants of the society in its aggregate capacity, the sa- 
tisfaction of which is the object of public consumption. The 
public buys and consumes the personal service of the minister, 
that directs its affairs, the soldier, that protects it from external 
violence, the civil or criminal judge, that protects the rights and 
interests of each member against the aggression of the rest. All 
these different vocations have their use, although they may often 
be unnecessarily multiplied or overpaid ; but that arises from a 
defective political organization, which it does not fall within the 
scope of this work to investigate. 

We shall see presently whence it is, that the public derives all 
the values, whevewith it purchases the service of its agents, as 
well as the articles its wants require. All we have to consider 
in this chapter is, the mode in which its consumption is operated, 
and the consequences resulting from it. 

If I have made myself understood in the commencement of 
this third book, my readers will have no difficulty in comprehend- 
ing, that public consumption, or that which takes place for the 
general utility of the whole community, is precisely analogous to 
that consumption, which goes to satisfy the wants of individuals 
or families. In either case, there is a destruction of values, and 
a loss of wealth; although) perhaps, not a shilling of specie 
goes, out of the country. 

By way of insuring conviction of the truth of this position, let 
us trace from first to last the passage of a product towards- ulti- 
mate consumption on the public account. 

The government exacts from a tax-payer the payment of a 
given tax in the shape of money. To meet this demand, the 
tax-payer exchanges part of the products at his disposal for coin, 
which he pays to the tax-gatherer:* a second set of government 
agents is busied in buying with that coin cloth and other neces- 
saries for the soldiery. Up to this point, there is no value lost 
or consumed: there has only been a gratuitous transfer of value, 
and a subsequent act of barter: but the value contributed by the 
subject still exists in the shape of stores and supplies in the mili- 
tary depot. In the end, however, this value is consumed; and 
then the portion of wealth, which passes from the hands of the 

* Although the capitalist and landholder receive their interest and rent 
originally in the shape of money, and liave, therefore, no occasion, to go 
through any previous act of exchange, to obtain wherev/ithal to pay the 
tax, yet such a previous exchange must Iiave been effected by the adventur- 
er, who turns the land or capital to account. The effect is precisely the 
same, as if the rent or interest had been paid in kind; i. e. in the immediate 
products of the land or capital; and the landholder or capitalist had paid 
the tax either by the direct transfer of part of those products, or by first 
selling, them, and afterwards paying over the proceeds. On this subject, 
vide supra. Book II. chap. 5, for the mode in which revenue is distributed 
amongst the commtinity, 



CHAP. VI. ON CONSUMPTION. 375 

tax-payer into those of the tax-gatherer, is destroyed and annihi- 
lated. 

Yet it is not the sum of money that is destroyed : that has only 
passed from one hand to another, either without any return, as 
when it passed from the tax-payer to the tax-gatherer; or in ex- 
change for an equivalent, as when it passed from the govern- 
ment agent to the contractor for clothing and supplies. The va- 
lue of the money survives the whole operation, and goes through 
three, four, or a dozen hands, without any sensible alteration; it 
is the value of the clothing and necessaries that disappears, with 
precisely the same effect,- as if the tax-payer had, with the same 
money, purchased clothing and necessaries for his own private 
consumption. The sole ditference is, that the individual in the 
one case, and the state in the other, enjoys the satisfaction re- 
sulting from that consumption. 

The same reasoning may be easily applied to all other kinds 
of public consumption. When the money of the tax-payer goes 
to pay the salary of a public officer, that officer sells his time, 
his talents, and his exertions, to the public; all of which are con- 
sumed for public purposes. On the other hand, that officer con- 
sumes, instead of the tax-payer, the value he receives in lieu of 
his services; in the same manner as any clerk or person in the 
private employ of the tax-payer would do. 

There has been long a prevalent notion, that the values, paid 
by the community for the public service, return to it again in 
some shape or other; in the vulgar phrase, that what govern- 
ment and its agents receive is refunded again by their expenditure. 
This is a gross fallacy; but one that has been productive of in- 
finite mischief, inasmuch as it has been the pretext for a great 
deal of shameless waste and dilapidation. The value paid to 
government by the tax-payer is given without equivalent or re- 
turn: it is expended by the government in the purchase of per- 
sonal service, of objects of consumption; in one word, of pro- 
ducts of equivalent value, which are actually transferred. Pur- 
chase or exchange is a very different thing from restitution.* 

Turn it which way you will, this operation, though often very 
complex in the execution, must always be reducible by analysis 
to this plain statement. A product consumed must always be 
a product lost, be the consumer who he may; lost without re- 
' turn wherever no value or advantage is received in return ; but, 
to the tax-payer, the advantage derived from the services of the 

* Dr. Hamilton, in his valuable tract upon The National Debt- of Great 
Britoin,-illustrates the absurdity of the position here attacked, by compar- 
ing it to the " forcible entry of a robber into a merchant's house, who should 
take away his money, and tell him he did him no injury, for tlie money, or 
part of it, would be employed in purchasing the commodities he dealt in, 
upon Avhich he would receive a profit." The encouragement afforded by 
the public expenditure is precisely analogous. 



376 ON CONSUMPTION. book iii. 

public functionary, or from the consumption effected in the pro- 
secution oifpubHc objeets, is a positive return. 

If, then, pubHc and private expenditure affect social wealth in 
the same manner, the principles of economy, by which it should 
be regulated, must be the same in both cases. There are not 
two kinds of economy, any more than two kinds of honesty, or 
of morality. If a government or an individual consume in such 
a way,. as to give birth to a product larger than that consumed, a 
sljccessful effort of productive industry will be made. If no pro- 
duct result from the act of consumption, there is a loss of value, 
whether to the state or to the individual; yet, probably, that loss 
of values may have been productive of all the good anticipated. 
Military stores and supplies, and the time and labour of civil and 
military functionaries, engaged in the effectual defence of the 
state, are well bestowed, though consumed and annihilated; it 
is the same with them, as with the commodities and personal 
service, that have been consumed in a private establishment. 
The sole benefit resulting in the latter case is, the satisfaction 
of a want; if the want had no existence, the expense or consump- 
tion is a positive mischief, incurred without an object. So like- 
wise of the public consumption ; consumption for the mere pur- 
pose of consumption, systematic profusion, the creation of an 
office, for the sole purpose of giving a salary, the destruction of^ 
an article, for the mere pleasure of paying for it, are acts of ex- 
travagance either in a government or an individual, in a small 
state or a large one, a republic or a monarchy. Nay, there is 
more criminality in public, than in private extravagance and pro- 
fusion ; inasmuch as the individual squanders only what belongs 
to him; but the government has nothing of its own to squander, 
being, in fact, a mere trustee of the public treasure.* 

What, then, are we to think of the principles laid down by 
those writers, who have laboured to draw an essential distinction 
between public and private wealth ; to show, that ecpnomy is 
the way to increase private fortune, but, on the contrary, that 
public wealth increases with the increase of public consumption: 
inferring thence this false and dangerous conclusion, that the 
rules of conduct in the management of private fortune and of 
public treasure, are not only different, but in direct opposition? 

If such principles were to be found only in books, and had ne- 
ver crept into practice, one might suffer them without care or' 
regret to swell the monstrous heap of printed absurdity; but it 

* It is mere usurpation in a government, to pretend to a right over the 
property of individuals, or to act as if possessing such aright; and usurpa- 
tion can never constitute right ; although it may confer possession. Were 
it otherwise, a thief, who had once, by force or fraud, obtained possession 
of another man's property, could never be called upbn to make restitution, 
when overpowered and taken prisoner, for he might. set up the plea of legi- 
timate ownership. . 



€iiAP. VI. ON CONSUMPTION. 377 

must excite our compassion and indignation to hear them pro- 
fessed by men of eminent rank, talents, and intelHgence ; and 
still more to see them reduced into practice by the agents of 
public authority, who can enforce error and absurdity at the point 
of the bayonent or mouth of the cannon.* 

Madame de Maintenon mentions in a letter .to the Cardinal de 
Noailles, that, when she one day urged Louis XIV. to be more 
liberal in charitable donations, he replied, that royalty dispenses 
charity by its profuse expenditure ; a truly alarming dogma, and 
one that shows tlie ruin of France to have been reduced to prin- 
ciple. "j" False principles are more fatal than even intentional 
misconduct ; because they are followed up with erroneous no- 
tions of self-interest, and are long persevered in without remorse 
or reserve. If Louis XIV. had believed his extravagant osten- 
tation to have been a mere gratification of his personal vanity, 
and his conquests the satisfaction of personal ambition alone, 
his good sense and proper feeling would probably, in a short 
time, have made it a matter of conscience to desist, or at any 
rate, he would have stopt short for his own sake ; but he was 
firmly persuaded, that his prodigality was for the public good as 
well as his own ; so that nothing could stop him, bat misfortune 
and humiliation. J 

* The reader will readily perceive, that this and many other passages, 
were written under the pressure of a military despotism, which had assumed 
the absolute disposal of the national resources, and suifered no one to express 
a doubt of the justice and policy of its acts. 

t Fenelon, Vauban, and a ver}^ few more, of the most distinguished ta- 
lent, had a confused idea of the ruinous tendency of this system ; but they 
failed in impressing the rest of the world with the same conviction, for want 
of just notions on the subject of the production and consumption of wealth. 
Thus Vauban, in his Dixme royale says, ' the present misery of France is 
attributable, not to the rigour of the climate, the character of the inhabi- 
tants, or the barrenness of the soil : for the climate is most favourable, the 
people active, diligent, dextrous, and numerous : but to the frequency and 
long continuance of war, and to the ignorance and neglect of economy.' 
Fenelo7i had expressed the same sentiments in several admirable passages 
of his Telemaque, but they passed for mere declamation, as well they might; 
for he was not qualified to prove their truth and accuracy. 

t When Voltaire tells us, speaking of the superb edifices of Louis XIV.j 
that they were by no means burthelisome to the nation, but served to cir- 
culate money in the community, he gives a decisive proof of the utter 
ignorance of the most celebrated French writers of his day upon these mat- 
ters. He looked no further than the monc}' employed on the occasion; and, 
when the view is limited to that alone, the extreme of prodigality exhibits 
no appearance of loss ; for money is, in fact, an item, neither of revenue, nor 
of annual consumption. But a little closer attention will convince us of the 
fallacy of this position, which would lead us to the absurd inference, that 
no consumption whatever has occurred within the year, whenever the 
amount of specie at the end of it is found to be nowise diininished. The 
vigilance of the historian should have traced the 900 millions of/r. expended 
on the chateau of Versailles alone, from the original production by the la- 
borious efforts of the productive classes of the nation, to the first excliange 
into money, wherewith to pay the taxes, through the second excliange 

56 



378 ON CONSUMPTION. book hi. 

So little were the true principles of political econpmy under- 
stood, even by men of the greatest science, so late as the 18th 
century, that Frederick II. of Prussia, with all his anxiety in 
search of truth, his sagacity, and his merit, writes thus to D'Alem- 
bert, in justification of his wars: ' My numerous armies promote 
the circulation of money, and disburse impartially amongst the 
provinces the taxes paid by the people to the stale.' Again I 
repeat, this is not the fact ; the taxes paid to the government by 
the subject are not refunded by its expenditure. Whether paid m 
money or in kind, they are converted into provisions and supplies, 
and in that shape consumed and destroyed by persons, that never 
can replace the value, because they produce no value whatever.* 
It was well for Prussia that Frederick II. did not square his con- 
duct to his principles. The good he did to his people, by the 
economy of his internal administration, more than compensated 
the mischief of his wars. 

Since the consumption of nations or the governments which 
represent them, occasions a loss of value, and, consequently, of 
wealth, it is only so far justifiable, as there results from it some 
national advantage, equivalent to the sacrifice of value. The 
whole skill of government, therefore, consists in the continual 
and judicious comparison of the sacrifice about to be incurred, 
with the expected benefit to the community ; for I have no hesi- 
tation in pronouncing every instance, where the benefit is not 
equivalent to the loss, to be an instance of folly, or of criminality, 
in the government. 

into building materials, painting, gilding, &c. to the ultimate consumption 
in that shape, for the personal gratification of the vanity of the monarch. 
The money acted as a mere means of facilitating the transfers of value in 
the course of the transaction ; and the winding up of the account will show, 
a destruction of value to the amount of 900 millions of /r. balanced by the 
production of a palace, in need of constant repair, and of the splendid pro- 
menade of the gardens. 

Even land, though imperishable, may be consumed in the shape of the 
value received for it. It has been asserted, that France lost nothing by the 
sale of her national domains after the revolution, because they were all sold 
and transferred to French subjects ; but what became of the capital paid in 
the shape of purchase-money, when it left the pockets of the purchasers ? 
Was it not consumed and lost ? 

* In the execution of a national military enterprise, two different values 
pass through the hands of the government or its agents: 1. The value paid 
in taxes by the public at large : 2. The value received in supplies and services 
from the parties affording them. For the first ofthese.no return whatever 
is made ; for the second, an equivalent is paid in wages or purchase-money. 
Wherefore, there it has no ground for saying that the government refunds 
with one hand what is received with the other ; that the whole transaction 
is a mere circulation of value, and causes no loss to the nation ; for the go- 
vernment returns but 1, where it receives 2 ; the loss of the other half falls 
upon the community at large. Thus, the national, being but the aggregate 
of individual, wealth, is diminished to the extent of the totiil consumption . 
of the government, minus the product of the public establishment ; as we 
shall presently see more in detail. 



CHAP. VI. ON CONSUMPTION. 379 

It is yet more monstrous, then, to see how frequently govern- 
ments, not content with squandering the substance of the peo- 
ple'^ in folly and absurdity, instead of aiming at any return of 
value, actually spend that substance in bringing down upon the 
nation calamities innumerable ; practise exactions the most cruel 
and arbitrary, to forward schemes the most extravagant and 
wicked ; first rifle the pockets of the subject, to enable them 
afterwards to urge him to the further sacrifice of his blood. No- 
thing, but the obstinacy of human passion and weakness, could 
induce me again and again to repeat these unpalatable truths, at 
the risk of incurring the charge of declamation. 

The consumption effected by the governmentf forms so large 
a portion of the total national consumption, amounting some- 
times to a sixth, a fifth, or even a fourth partj of the total con- 
sumption of the community, that the system acted upon by the 
government, must needs have a vast influence upon the advance 
or decline of the national prosperity. Should an individual take 
it into his head, that the more he spends the more he gets, or 
that his profusion is a virtue ; or should he yield to the powerful 
attractions of pleasure, or the suggestions of perhaps a reason- 
able resentment, he will in all probability be ruined, and his ex- 

* It has been seen in the concluding chapter of Book II., that, inasmuch 
as population is always commensurate with production, the obstruction of 
the progressive multiplication of products is a preventive check to the fur- 
ther multiplication of the human race ; and that the waste of capital, the 
extinction of industry, and the exhaustion of the sources of production, 
amounts to positive decimation of those in actual existence. A wicked or 
ignorant administration may, in this way, be a far more destructive scourge, 
than war with all its atrocities. 

t By government, T mean, the ruling power in all its branches, and under 
whatever constitutional form ; it would be wrong to limit the term to the 
executive branch alone ; the first enactment of a law is as much an act of 
authority, as its subsequent enforcement. 

t The consumption ofa nation may undoubtedly exceed its aggregate an- 
nual revenue ; but we can hardly suppose that of Great Britain to have 
done so ; for she has evidently been advancing in opulence, up to the pre- 
sent time, whence it may be inferred, that her consumption, at the very 
utmost, only equals her revenue. Gentz, who will hardly be accused of un- 
derrating the financial resources of that country, estimated her total an- 
nual revenue at no more than 200 millions sterling ; Dr. Beeke at 218 mil- 
lions, inclusive of 100 millions for the revenues of industry. Granting her 
to have made some further progress since those estimates were made, and 
that her total revenue in 1813, had advanced to 224 millions, we are told 
By Colquhoun, in his Wealth, Power, and Resources of the British Empire, 
that her public expenditure in that year amounted to 112 millions. By 
this statement it should seem, that her public expenditure then amounted 
to the half of the total expenditure of the nation! Moreover, the expenses 
of her central government do not include all her public charges ; there are 
to be added, county and parish rates, poor rates, &c. &Ci The business of 
government might be conducted, even in extensive empires, at a charge of 
not more than one per cent, upon the aggregate of individual revenue ; but, 
to attain this degree of perfection, a vast improvement is still requisite in 
the department of practical policy. 



380 ON CONSUMPTION. book hi. 

ample will operate upon a very small circle of his neighbours. 
But a mistake of this kind in the government will entail misery 
upon millions, and possibly end in the national dovvnfal or degra- 
dation. It is doubtless very desirable, that private persons 
should have a correct knowledge of their personal interests ; but 
it must be infinitely more so, that governments should possess 
that knowledge. Econpmy and order are virtues in a private 
station ; but, in a public station, their influence upon national 
happiness is so immense, that one hardly knows how sufiiciently 
to extol and honour them in the guides and rulers of national con- 
duct. 

An individual is fully sensible of the value of the article he is 
consuming; it has probably cost him a world of labour, perse- 
verance, and economy ; he can easily balance the satisfaction he 
derives from its consumption against the loss it v/ill involve. But 
a government is not so immediately interested in regularity and 
economy, nor does it so soon feel the ill consequences of the 
opposite qualities. Besides, private persons have a further mo- 
tive than even self-interest ; their feeling are concerned ; their 
economy may be a benefit to the objects of their affection ; 
whereas, the economy of a ruler accrues to the benefit of those 
he knows very little of; and perhaps he is but husbanding for an 
extravagant and rival successor. 

Nor is this evil remedied, by adopting the principle of heredi- 
tary rule. The monarch has little of the feelings common to 
other men in this respect. He is taught to consider the fortune 
of his descendants as secure, if they have ever so little assurance 
of the succession. Besides, the far greater part of the public 
consumption is not personally directed by himself; contracts are 
not made by himself, but by his generals and ministers ; the ex- 
perience of the world hitherto, all tends to show, that aristocra- 
tical republics are more economical, than either monarchies or 
democracies. 

Neither are we to suppose, that the genius which prompts and 
excites great national undertakings, is incompatible with the spi- 
rit of public order and economy. The name of Charlemagne 
stands among the foremost in the records of renown ; he achiev- 
ed the conquest of Italy, Hungary, and Austria ; repulsed the 
Saracens ; broke the Saxon confederacy ; and obtained at length 
the honours of the purple. Yet Montesquieu has thought it not 
derogatory to say of him, that " the father of a family might take 
a lesson of good house-keeping from the ordinances of Charle- 
magne. His expenditure was conducted with admirable system ; 
he had his demesnes valued with care, skill, and minuteness. We 
find detailed in his capitularies, the pure and legitimate sources 
of his wealth. In a word, such was his regularity and thrift, 
that he gave orders for the eggs of his poultry-yards, and the sur- 



CHAP. VI. ON CONSUMPTION. 381 

plus vegetables of his garden to be brought to market."* The 
celebrated Prince Eugene, who displayed equal talent in negotia- 
tion and administration as in the field, advised the Emperor 
Charles VI., to take the advice of merchants and men of busi- 
ness, in matters of finance. f Leopold, when Grand Duke of 
Tuscany, towards the close of the 18lh century, gave an eminent 
example of the resources, to be derived from a rigid adherence to 
the principles of private economy, in the administration of a state 
of very limited extent. In a few years, he made Tuscany one of 
the most flourishing states of Europe. 

The most successful financiers of France, Suger, Abbe de St. 
Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, 
have all acted on this same principle. All found means of car- 
rying into effect the grandest operations by adhering to the dic- 
tates of private economy. The Abbe de St. Dennis furnished 
the outfit of the second crusade ; a scheme that required very 
large supplies, although one I am far from approving. The Car- 
dinal furnished Louis XII. with the means of making his con- 
quest of the Milanese. Sully accumulated the resources, that 
afterwards humbled the house of Austria. — Colbert supplied the 
splendid operations of Louis XIV. Necker provided the ways 
and means of the only successful war waged by France in the 
18th century.J 

Those governments, on the contrary, that have been perpe- 
tually pressed with the want of money, have been obliged, like 
individuals, to have recourse to the most ruinous, and sometimes 
the most disgraceful, expedients to extricate themselves. Charles 
the Bald put his titles and safe-conducts up to sale. Thus, too, 
Charles II. of England sold Dunkirk to the French king, and 
took a bribe of 80,000/. from the Dutch, to delay the saihng of 
the English expedition to the East Indies, 1680, intended to 
protect their settlements in that quarter, which, in consequence, 
fell into the hands of the Dutchmen. § Thus, too, have govern- 
ments committed frequent act of bankruptcy, sometimes in the 
shape of adulteration of their coin, and sometimes by open breach 
of their engagements. 

Louis XIV. towards the close of his i-eign, having utterly ex- 

* Esprit des Lois, liv. xxxi. c. 18. 

t Memoires du Prince Eugene par luimeme, p. 187. Tlie authenticity of 
this work has been contested, as well as the Testament Politique of Riche- 
lieu. If not themselves the authors, they must at least have been men of 
equal capacity, of which there is still less probability. 

t He contrived to meet the charges of the American war, without the 
imposition of any additional taxes. He has been reproached, indeed, with 
having incurred heavy loans ; but it is obvious, that, so long as he found 
means to pay the interest upon them without fresh taxation, they were 
nowise burthensome upon the nation ; and that the interest must have been 
defrayed by retrenchment of the expenditure. 

§ Raynal. Histoire des Elab. des Europ. dans les Indes, torn. ii. p. 36. 



382 ON CONSUMPTION. book hi. 

hausted the resources of a noble territory, was reduced to the 
paltry shift of creating the most ridiculous offices, making his 
counsellors of state, one an inspector of fagots, another a li- 
censer of barber-wig-makers, another visiting inspector of fresh, 
or taster of salt, butter, and the like. Such paltry and mischiev- 
ous expedients can never long defer the hour of calamities, that 
must sooner or later befal the extravagant and spendthrift go- 
vernments. " When a man will not listen to reason," says 
Franklin, " she is sure to make herself felt." 

Fortunately, an economical administration soon repairs the 
mischiefs of one of an opposite character. Sound health can 
not be restored all at once; but there is a gradual and percepti- 
ble improvement: every day some cause of complaint disap- 
pears, and some new faculty comes again into play. Half the 
remaining resources of a nation, impoverished by an extravagant 
administration, are neutralized by alarm and uncertainty ; where- 
as, credit* doubles those of a nation, blessed with one of a fru- 
gal character. It would seem, that there exists in the politic, to 
a stronger degree than even in the natural, body a principle of 
vitality and elasticity, which can not be extinguished without the 
most violent pressure. One can not look into the pages of his- 
tory, without being struck with the rapidity, with which this prin- 
ciple has operated. It has no where been more strikingly exem- 
plified, than in the frequent vicissitudes that our own France has 
experienced since the commencement of the revolution. Prussia 
has afforded another illustration in our time. The successor of 
Frederick the Great squandered the accumulations of that mo- 
narch, which were estimated at no less a sum than 228 millions 
of francs, and left behind him besides a debt of 112 millions. In 
less than eight years, Frederick William III. had not only paid 
off his father's debts, but actually began a fresh accumulation; 

* The expressions, credit is declining, credit is reviving, are common in 
the mouths of the generality, who are, for the most part, ignorant of the 
precise meaning of cre^Zi^. It does not imply confidence in the government 
exclusively ; for the bulk of the commimity have no concern witli govern- 
ment, in respect to their private affairs. Neither is it exclusively applied 
to the mutual confidence of -individuals; for a person in good repute and 
circumstances, does not forfeit them all at once; and, even in times of ge- 
neral distress, the forfeiture of individual character is by no means so uni- 
versal, as to justify the assertion, that credit is at an end. It would rather 
seem to imply, confidence in future events. The temporary dread of taxa- 
tion, arbitrary exaction, or violence, will deter numbers from exposing their 
persons or their property; undertakings, however promising and "well-plan- 
ned, become too hazardous ; new ones are altogether discouraged, old ones 
feel a diminution of profit ; merchants contract their operations ; and con- 
sumption in general falls off, in consequence of the decline and the uncer- 
tainty of individual revenue. There can be no confidence in future events, 
either under an enterprising, ambitious, or unjust government, or under 
one, that is wanting in strength, decision, or method. Credit, like crys- 
tallization, can only take place in a state of quiescence. 



CHAP. VI. ON CONSUMPTION. 383 

such is the power of economy, even in a country of limited ex- 
tent and resources! 



SECTION II. 

Of the principal Objects of Jfational Expenditure. 

In the preceding section, it has been endeavoured to show, 
that, since all consumption by the public is in itself a sacrifice of 
value, an evil balanced only by such benefit, as may result to the 
community from the satisfaction of any of its wants, a good ad- 
ministration will never spend for the mere sake of spending, but 
take care to ascertain that the public benefit, resulting, in each 
instance, from the satisfaction of a public want, shall exceed the 
sacrifice incurred in its acquirement. 

A comprehensive view of the principal public wants of a civi- 
lized community, can alone qualify us to estimate with tolerable 
accuracy the sacrifice it is worth while for the community to 
make for their gratification.* 

The public consumes little else, but what have been denomi- 
nated, immaterial products, that is to say, products destroyed as 
soon as created; in other words, the services or agency, either 
of human beings, or of other objects, animate or inanimate. f 

It consumes the personal service of all its functionaries, civil, 
judicial, mihtary, or ecclesiastical. It consumes the agency of 
land and capital. The navigation of rivers and seas, utility of 
roads and ground open to the public, are so much agency deriv- 
ed by the public from land, of which either the absolute proper- 
ty, or the beneficial enjoyment, is vested in the public. Where 
capital has been vested in the land, in the shape of buildings, 
bridges, artificial harbours, causeways, dikes, canals, &c. the 
public then consumes, the agency, or the rent of the land, plus 
the agency, or the interest, of the capital so vested. 

Sometimes the public maintains establishments of productive 
industry ; for instance, the porcelain manufacture of Sevres, the 
Gobelin tapestry, the salt works of Lorraine and of the Jura, &c. 
in France. When concerns of this kind bring more than their 

* A mere sketch is all that can be expected in a work like the present : 
a complete treatise on government would be equally inappropriate with a 
survey of the arts, when it became incidentally necessary to touch upon 
the processes of manufacture. Yet, either would be a valuable addition to 
literary wealth. 

t This rule must be taken with some qualification. The habitual lar- 
gesses of corn, distributed by the emperors to the people of ancient Rome, 
were material objects of public consumption. So likewise the provisions 
of all kinds consumed in hospitals and prisons, and the fireworks used on 
occasions of public display or rejoicing, for the amusement of the people at 
large. 



384 ON CONSUMPTION. book m. 

expenditure, which is but rarely the case, they furnish part of the 
national revenue, and must by no means be classed among the 
items of national charge. 

Of the Charge of Civil and Judicial Administration. 

The charge of civil and judicial administration is made up, 
partly of the specific allowances of magistrates and other officers, 
and partly of such degree of pomp and parade, as may be deem- 
ed necessary in the execution of their duties. Even if the bur- 
then of that pomp and parade be thrown wholly or partially upon 
the public functionary, it must ultimately fail upon the shoulders 
of the public, for the salary of the functionary must be raised, in 
proportion to the appearance he is expected to make. This ob- 
servation applies to every description of functionary, from the 
prince to the constable inclusive; consequently, a nation, which 
reverences its prince only when surrounded with the externals 
of greatness, with guards, horse and foot, laced liveries, and 
such costly trappings of royalty, must pay dearly for its taste. If, 
on the contrary, it can be content to respect simplicity rather 
than pageantry, and obey the laws, though unaided by the attri- 
butes of pomp and ceremony, it will save in proportion. This 
is what made the charges of government so light in many of th^ 
Swiss cantons, before the revolution, and in the North American 
colonies before their emancipation. It is well known, that those 
colonies, though under the dominion of England, had separate 
governments, of which they respectively defrayed the charge; yet 
the whole annual expenditure all together amounted to no more 
than 64,700Z. sterling. ' An ever memorable example,' observes 
Smith, ' at how small an expense three milHons of people may 
not only be governed, but well governed.'* 

* It should be recollected, however, that they were at no charge of de- 
fence from external attack, except in respect to the savage tribes of the in- 
terior. 

From the official account of the receipts and disbursements of the United 
States, in the year 1806, presented by Mr. Gallatin, then Secretary of the 
Treasury, it appears that the total expenditure fell short of 12 millions of 
dollars, of which eight millions went to pay the interest of the public debt ; 
leaving a sum of 4 millions only (i. e. somewhat more than 21 millions of 
francs) for the charge of government, that is to say, the civil, judicial, mili- 
tary, and other public functions of a population of 12 millions : which is 
wholly defrayed by taxes on imports. («) 



(a) This account is exclusive of the local disbursements of the different 
States. The population of the Union, 1806, was never estimated higher 
than 8 millions. The public <iebt and charges have both advanced very 
rapidly since that period, principally in consequence of the second war wdth 
Great Britain. The accounts for the year 1820 show a receipt of 22,326,244 
dollars, inclusive of loans and balance of preceding year ; and an expenditure 
of 25,064,413 dollars, inclusive of interest on the public debt; exhibiting a 



CHAP. VI. ON CONSUMPTION. 385 

Causes entirely of a political nature as well as the form of 
government which they help to determine, have an influence in 
apportioning the salaries of public officers, civil and judicial, the 



deficit of $2,638,169. The estimates for 1821, show a receipt of 16,550,000 
dollars, and an expenditure of 21,163,417 dollars, exhibiting a deficit, in- 
clusive of that of 1820, of no less than 7,451,595 dollars, which has been re- 
duced by retrenchments to 4,658,483 dollars: to meet this, a loan has been 
again proposed, as the only alternative of a return to internal taxation. If 
America should persist in her views of naval aggrandizemejit, and in her 
absurd imitation of the errors of the English prohibitive system, and, above 
all, in her attempt to return to a metallic money, she will probably soon 
find her finances still less flourishing than at present. (1) T. 



(1) [The population of the United States, according to the Census, was 
in 1790 - - - - - - - 3,929,326 

1800 - - - - - - 5,309,326 

1810 .. - - - - - _- 7,239,903 

And the foUovtdng presents, at one view, the amount of the population of 
all the States and Territories, agreeably to the Census of 1820. 



States. 



1 Maine 


2- New -Hampshire 
3 Massachusetts 


4 Rhode Island 


5 Connecticut 


6 Vermont 


7 New- York 


8 New-Jersey 

9 Pennsylvania - 
Id Delaware - 


11 Maryland 

12 Virginia 

13 North-Carolina 


14 South-Carolina 


15 Georgia 

16 Ohio 


17 Kentucky 

18 Indiana 


19 Illinois 


20 Missouri 


91 Tennessee 


22 Mississippi 

23 Alabama 


24 Louisiana - 


Territories. 


I District of Columbia 


2 Michigan - 

3 Arkansas 


4 Florida 



298,335 
244,161 
523,287 

83,059 

275,248 

235,764 

1,372,812 

277,575 

1,049,458 

72,749 
407,350 
1,065,366 
638,829 
502,741 
340,989 
585,434 
564,317 
148,178 

55,211 

66,586 
422,813 

75,448 
103,816 
153,407 



33,039 

8,896 

14,273 

12,000 



9,631,141] 
American Editor. 
57 



386 ON CONSUMPTION. book in. 

charge of public display, and thoSe likewise of public institutions 
and establishments. Thus, in a despotic government, where the 
subject holds his property at the will of the sovereign, who fixes 
himself the charge of his household, that is to say, the amount 
of the public money which he chooses to spend ori his personal 
necessities and pleasures and the keeping up of the royal estab- 
lishment, that charge will probably be fixed at a higher rate, than 
where it is arranged and contested between the representatives 
of the prince and of the tax-payers respectively. 

The salaries of inferior public officers in like manner depend, 
partly upon their individual importance, and partly upon the gene- 
ral plan of government. Their services are dear or cheap to the 
public, not merely in proportion to what they actually cost, but 
likewise in proportion as they are well or ill executed. A duty 
ill performed is dearly bought, however little be paid for it; it is 
dear too, if it be superfluous, or unnecessary ; resembling in this 
respect an article of furniture, that, if it do not answer its pur- 
pose, or be not wanted, is merely useless lumber. Of this des- 
cription, under the old regime of France, were the officers of 
high-admiral, high-steward of the household, the king's cup-bear- 
er, the master of his hounds, and a variety of. others, which add- 
ed nothing even to the splendour of royalty, and were merely 
so many means of dispensirig personal favour and emolument. 

For the same reason, whenever the offices of government are 
needlessly multiplied, the people are saddled with charges, which 
are not necessary to the maintenance of public order. It is on- 
ly giving an unnecessary form to that benefit, or product, which 
is not at all the better of it, if indeed it be not worse.* A bad 
government, that can not support its violence, injustice, and ex- 
action, without a multitude of mercenaries, satellites, and spies, 
and gaols innumerable, ilnakes its subjects pay for its prisons, 
spies, and soldiers, which nowise contribute to the public happi- 
ness. 

On the other hand, a pubhc duty may be cheap, although very 
liberally paid. A low salary is wholly thrown away upon an in- 
capable and inefficient officer ; his ignorance will probably cost 
the public ten times the amount of his salary; but the knowledge 
and activity of a man of ability are fully equivalent to the pay he 
receives ; the losses he saves to the public, and the benefits de- 
rived from his exertions, greatly outweigh his personal emolu- 
ment, even if settled on the most liberal scal6. 

There is real economy in procuring the best of every thing, 
even at a larger price. Merit can seldom be engaged at a low 

* An example occurs to me of a city of France, wliose municipal admi- 
nistration was both mildly and efficiently conducted before 1789, at a charge 
of 1000 crowns per annum only ; but under the Imperial government, though 
it cost 30,000/)-., afforded no security against the caprice and arbitrary will 
of the sovereign. 



CHAP. VI. ON CONSUMPTION, 387 

rate, because it is applicable to more occupations than one. 
The talent, that makes an able minister, would, in another pro- 
fession, make a good advocate, physician, farmer, or merchant ; 
and merit will find both employment and emolument in all these 
departments. If the public service offer no adequate reward for 
its exertion, it will choose some other more promising occupa- 
tion. . 

Integrity is like talent; it can not be had without paying for it, 
which is not at all wonderful ; for the honest man can not resort 
to those discreditable shifts and contrivances, which dishonesty 
looks to as a supplemental resource. 

The power, which commonly accompanies the exercise of pub- 
lic functions, is a kind of salary, that often far exceeds the pecu- 
niary emolument attached to them. It is true, that in a well order- 
ed state, where law is supreme, and little is left to the arbitrary con- 
trol of the ruler, there is little opportunity of indulging the caprice 
and love of domination implanted in the human breast. Yet the dis- 
cretion, which the law must inevitably vest in those who are to 
to enforce it, and particularly in the ministerial department, toge- 
ther with the honour commonly attendant on the higher offices 
of the state, have a real value, which makes them eagerly sought 
for, even in countries where they are by no means lucrative. 

The rules of strict economy would probably make it advisable 
to abridge all pecuniary allowance, wherever there are other suf- 
ficient attractions to excite a competition for office, and to confer 
it on none but the wealthy, were there not a risk of losing, by 
the incapacity of the officer, more than would be gained by the 
abridgment of his salary. This, as Plato well observes in his 
Republic, would be like entrusting the helm to the richest man 
on board. Besides, there is some danger, that a man, who gives 
his services for nothing, will make his authority a matter of gain, 
however rich he may be. The wealth of a public functionary is 
no security against his venality : for ample fortune is commonly 
accompanied with desires as ample, and probably even more am- 
ple, especially if he have to keep up an appearance, both as a 
man of wealth and as a magisttate. Moreover, supposing what 
is not altogether impossible, namely, that one can meet with 
wealth united with probity, and with, besides, the activity requi- 
site to the due performance of public duty, is it wise to run the 
risk of adding the preponderance of authority to that of wealth, 
which is already but too manifest? With what grace could his 
employers call to account an agent, who could assume the merit 
of generosity, both with the people and with the government? 
There are, however, some ways, in which the gratuitous services 
of the rich may be employed with advantage; particularly in those 
departments, that confer more honour than power : as in the ad- 
ministration of institutions of public charity, or of public correc- 
tion or punishment. 



388 ON CONSUMPTION. book hi. 

In France under the old regime, the government, when harass- 
ed with the want of money, was in the habit of putting up its of- 
fices to sale. This is the very worst of all expedients ; it intro- 
duces all the mischiefs of gratuitous service; for the emolument 
is then no more, than the interest of the capital expended in the 
purchase of the office ; and has the additional evil ol" costing to 
the state as much, as if the service were not gratuitously perform- 
ed ; for the public remains charged with the interest of a capital, 
that has been consumed and lost. 

It has been sometimes the practice to consign certain civil 
functions, such as the registry of births, marriages, and deaths, 
to the ecclesiastical bodyj whose emoluments, arising from their 
clerical duties, may be supposed to enable them to execute these 
without pay. But there is always danger in confiding the execu- 
tion of civil duties to a class of men, that pretend to a commission 
from a still higher than the national authority.* 

In spite of every precaution, the public or the monarch will 
never be served so well or so cheaply as individuals. Inferior pub- 
lic agents can not be so narrowly watched by their superiors, as pri- 
vate ones; nor have the superiors themselves an equal interest in 
vigilant superintendence. Besides, it is easy enough for underlings 
to impose on a superior, who has many to look after, is perhaps 
placed at a distance, and can give but little attention to each in- 
dividually ; and whose vanity makes him more alive to the offi- 
cious zeal of his inferior, than to the real service and utility, that 
the public good requires. As to the monarch and the nation, 
who are the parties most interested in good public administration, 
because it consolidates the power of the one and enlarges the 
happiness of the other, it is next to impossible for them to exert 
a perpetual and effectual control. In most cases, this duty must 
of necessity devolve on agents, who will deceive them when itis 
their interest to do so, as is proved by abundance of examples. 
"Public services," snys Smith, "are never better performed, than 
when their reward comes only in consequence of their being 
performed, and is proportioned to the diligence employed in per- 

* Several times during the last century the Molinist priesthood refused 
to execute their clerical duties in favour of the Jansenists, in spite of all the 
government could do; on the pretence, that it was better to oTaey the divine 
command as conveyed by the voice of the Pope, than that of any human 
authority. («) 



(a) This inconvenience can arise only in countries, where there is an ex- 
clusive national church, subjected, in matters of doctrine and discipline, to 
an independent or external superior : as in countries embracing the faith of 
Rome. But there is another inconvenience, that has been much dwelt upon 
by an eminent divine of the Scottish church; viz. the inconvenience of direct- 
ing the attention of the priesthood from its clerical to civil functions, and, 
by a confusion of such different duties, abridging the benefit of division of 
labour. T. 



CHAP. VI. ON CONSUMPTION. 389 

forming them." Accordingly, he recommends, that the salaries 
of judges should be paid at the final determination of each suit, 
and the share of each judge proportioned to their respective trou- 
ble in the progress of it. This would, be some encouragement 
to the diligence of each particular judge, as well as to that of the 
court, in bringing litigation to an end. There. would be some 
difficulty in applying this method to all the branches of the pubhc 
service ; and it would probably introduce as great abuses in the 
opposite way ; but it would at least be productive of one good ; 
viz. preventing the needless multiplication of offices. It would 
likewise give the public the same advantage of competition, as 
enjoyed by individuals, in respect to the services they call for. 

Not only are the time and labour of public men in general bet- 
ter paid for than those of other persons, besides being often 
wasted by their own mismanagement, without the possibility of 
an efficient check ; but there is often a further enormous waste^ 
occasioned by comphance with the customs of the country, and 
court etiquette. It would be curious to calculate the time wast- 
ed in the toilet, or to estimate, if possible, the many dearly-paid 
hours lost, in the course of the last century, on the road between 
Paris and Versailles. 

Thus, in the governments of Asia, there is an immense waste 
of the time of the superior public servants in tedious and cere- 
monious observances. The monarch, after allowing for the hours 
of customary parade, and those of personal pleasure, has little 
time left to look after his own affiiirs, which, consequently, soon go 
to ruin. Frederick II. of Prussia, by adopting a contrary line of 
conduct, and by the judicious distribution and apportionment of 
his time, contrived to get through a great deal of business him- 
self By this means, he really lived longer than older men than 
himself, and succeeded in rafsing his kingdom to a first rate 
power. His other great qualities, doubtless, contributed to his 
success ; but they would not have been sufficient, without a me- 
thodical arrangement of his time. 

Of Charges, JMilitary and JVaval. 

When a nation has made any considerable progress in com- 
merce, manufacture, and the artSj and its products have, conse- 
quently, become various and abundant, it would be an immense 
inconvenience, if every citizen were hable to be dragged from a 
productive employment, which has become necessary to society, 
for the purposes of national defence. The cultivator of the soil 
works no longer for the sustenance of himself and family only, 
but also for that of many other families, who are either owners of 
the soil, and share in its produce, or traders and manufacturers, 
that supply him with articles he can not do without. He must, 
therefore, cultivate a larger extent of surface, must vary his til- 



390 ON CONSUMPTION. book in. 

lage, keep a larger stock of cattle, and follow a complex mode 
of cultivation, that will fully occupy his leisure between seed- 
time and harvest.* 

Still less can the trader and manufacturer afford thus to sacri-- 
fice time and talents, whereof the constant occupation, except 
during the intervals of rest, is necessary to the production, from 
which they are to derive their subsistence. 

The owners of land let out to farm may, undoubtedly, serve 
as soldiers without pay ; as, indeed, the nobility and gentry do, 
in some measure, in monarchical states ; but they are, for the 
most part, so much accustomed to the sweets of social existence, 
so little goaded by necessity towards the conception and achieve- 
ment of great enterprises, and feel so little of the enthusiasm of 
emulation and esprit de corps, that they commonly prefer a pecu- 
niary sacrifice, to that of comfort, and possibly of life. And these 
motives operate equally with the owners of capital. 

All these reasons have l«d individuals, in most modern states,- 
to consent to a taxation, that may enable the monarch or the re- 
public to defend the country against external violence with a hired 
and professional soldiery, who are, however, too apt to become 
the tools of their leader's ambition or tyranny. , 

When war has become a trade, it benefits, hke all other trades, 
from the division of labour. Every branch of human science is 
pressed into its service. Distinction or excellence, whether in 
the capacity of general, engineer, subaltern, or even private sol- 
dier, can not be attained without long training, perhaps, and con- 
stant practice. The nation, which should act upon a different 
principle, would lie under the disadvantage of opposing the im- 
perfection, to the perfection, of art. Thus, excepting the cases, 
in which the enthusiasm of a whole nation has been roused to 
action, the advantage has uniformly been on the side of a disci- 
plined and professional soldiery. The Turks, although profess- 
ing the utmost contempt for the arts of their Christian neighbours, 
are compelled by the dread of extermination to be their scholars 
in the art of war. The European powers were all forced to adopt, 
the military tactics of the Prussians ; and, when the violent agi- 
tation of the French revolution pressed every resource of science 
to the aid of the armies of the republic, the enemies of France 
were obhged to follow the example. , 

This extensive application of science, and adaptation of fresh 
means and more ample resources to military purposes, have made 
war far more expensive now than in former times. It is neces- 

* The (3-re.eks, until the second Persian war, and the Romans, until the 
siege of Veii, regularly made their military campaigns in that interval. Na- 
tions of hunters or shepherds, that pay little attention to the arts, and none 
to agriculture, like tlie Tartars and Arabs, are less circumscribed in time, 
and can prosecute their warlike enterprises in any quarter, that promises 
booty, and furnishes pasturage. Hence the vast area of the conquests -of 
Attila, Genghis Khan, and Tamerlane, and of the Moors and the Turks. 



CHAP. VI. ON CONSUMPTION. 391 

sary now-a-days, to provide an army beforehand, with siippUcs of 
arms, ammunition, magazines of provision, ordnance, &c., equal 
to the consumption of one campaign at the least. The invention 
of gunpowder has introduced the use of weapons more complex 
and expensive and very chargeable in the transport, especially the 
field and battering trains. Moreover, the wonderful improvement 
of naval tactics, the variety of vessels of every class and con- 
struction, all requiring the utmost exertion of human genius and 
industry; the yards, docksj machinery, store-houses, &c. have 
entailed upon-nations addicted to war almost as heavy an expense 
in peace, as in times of actual hostility ; and obliged them not 
only to expend a great portion of their income, but to vest a great 
amount of capital likewise, in military establishments. In addi- 
tion to all which, it is to be observed, that the modern colonial 
system, that is to say, the system of retaining the sovereignty of 
towns and provinces in distant parts of the world, has made the 
European states open to attack and aggression in the most re- 
mote quarters of the globe, and the whole world the theatre of 
warfare, when any of the leading powers are the belligerents.* 

Wealth has, consequently, become as indispensable as valour 
to the prosecution of modern warfare ; and a poor nation can no 
longer withstand a rich one. Wherefore, since wealth can be 
acquired only by industry and frugality, it may safely be pre- 
dicted, that every nation, whose agriculture, manufacture, arid 
commerce, shall be ruined by bad government, or exorbitant 
taxation, must infallibly fall under the yoke of its more provident 
neighbours. We may further conclude, that henceforward na- 
tional strength will accompany national science and civilization ; 
for none but civilized nations can maintain considerable standing 
armies ; so that there is no reason to apprehend the future re- 
currence of those sudden overthrows of civilized empires by the 
influx of barbarous tribes, of which history affords many ex- 
amples. 

War costs a nation more than its actual expense ; it costs, 
besides all that would have been gained, but for its occurrence. 

When Louis XIV. in 1672, resolved in a fit of passion, to 
chastise the Dutch for the insolence of their newspaper writers, 
Boreel, the Dutch ambassador, laid before him a memorial show-' 
ing that France through the medium of Holland, sold produce 
annually to foreign nations, to the amount of sixty millions /r. at 
the then scale of price ; which will fall little short of 120 millions 
at the present. But the court treated his representations as the 
mere empty bravado of an ambassador. 

* It has been calculated that every soldier, brought into the field by 
Great Britain, during her last war with America, cost her twice as much 
as one on the continent of Europe. And the other charges of warfare must 
of course be aggravated by the distance in an equal ratio. 



392 ON CONSUMPTION, book in. 

To conclude : the charges of war would be very incorrectly 
estimated, were we to take no account of the havoc and destruc- 
tion it occasions ; for that one at least of the belligerents, whose 
territory happens to be the scene of operations, must be exposed 
to its ravages. The more industrious the nation, the more does 
it suffer from warfare. When it penetrates into a district abound- 
ing in agricultural, manufacturing, and commercial establishments, 
it is like a fire in a place full of combustibles ; its fury is aggra- 
vated, and the devastation prodigious. Smith calls the soldier 
an unproductive labourer ; would to God he were nothing more, 
and not a destructive one into the bargain ! he not only adds no 
product of his own {a) to the general stock of wealth, in return 
for the necessary subsistence he consumes, but is often set to 
work to destroy the fruits of other people's Jabour and toil, with- 
out doing himself any benefit. 

The tardy, but irresistible expansion of intelligence will proba- 
bly operate a still further change in external political relations, 
and with it a prodigious saving of expenditure for the purposes 
of war. Nations will be taught to know that they have really 
no interest in fighting one another ; that they are sure to suffer 
all the calamities incident to defeat, while the advantages of suc- 
cess are altogether illusory. According to the international po- 
licy of the present day, the vanquished are sure to be taxed by 
the victor, and the victor by domestic authority : for the interest 
of loans must be raised by taxation. There is no instance on 
record, of any diminution of national expenditure being effected 
by the most successful issue of hostilities. And, what is the 
glory it can confer more than a mere toy of the most extravagant 
price, that can never even amuse rational minds for any length 
of time? Dominion by land or sea will appear equally destitute 
of attraction, when it comes to be generally understood, that all 
its advantages rest with the rulers, and that the subjects at large 
derive no benefit whatever. To private individuals, the greatest 
possible benefit is entire freedom of intercourse, which can 
hardly be enjoyed except in peace. Nature prompts nations to 
mutual amity; and, if their governments take upon themselves 
to interrupt it, and engage them in hostility, they are equally 
inimical to their own people, and to those they war against. If 
their subjects are weak enough to second the ruinous vanity or 
ambition of their rulers in this propensity, I know not how to dis- 
tinguish such egregious folly and absurdity, frorn that of thfe 



(a) This is too generally expressed. Where security from external attack 
is only to be had by means of a professional soldiery, the soldier is a pro- 
ductive agent — productive of the immaterial product, security from ex- 
ternal attack, than which, under certain circumstaiices, none can be more 
valuable. T. 



CHAP. VI. ON CONSUMPTION. 393 

brutes that are trained to fight and tear each other to pieces, for 
the mere amusement of their savage masters. 
^ But human intelligence will not stand still ; the same impulse 
that has hitherto borne it onwards, will continue to advance it yet 
further.* The very circumstance of the vast increase of expense 
attending national warfare has made it impossible for govern- 
ments henceforth to engage in it, without the public assent, ex- 
press or implied ; and that assent will be obtained with the more 
difficulty, in proportion as the public shall become more generally 
acquainted with their real interest. The national military esta- 
blishment will be reduced to what is barely sufficient to repel 
external attack; for which purpose little more is necessary, than 
a small body of such kinds of troops, as can not be had without 
long training and exercise ; as of cavalry and artillery. For the 
rest, nations will rely on their militia, and on the excellence of 
their internal polity : for it is next to impossible to conquer a 
people, unanimous in their attachment to their national institu- 
tions ; and their attachment will always be proportionate to the 
loss they will incur by a change of doraination-t 

Of the Charges of Publie Instruction. 

Two questions have been raised in political economy; 1. whe- 
ther the public be interested in the cultivation of science in all 
its branches'? 2. whether it be necessary, that the public should 
be at the expense of teaching those branches, it has an interest 
in cultivating? 

Whatever be the position of man in society, he is in constant 
dependence upon the three kingdoms of nature. His food, his 
clothing, his medicines, every object either of business or of 
pleasure, is subject to fixed laws; and the better those laws are 
understood, the more benefit will accrue to society. Every indi- 
vidual, from the common mechanic, that works in wood or clay, 
fo the prime minister that regulates with a dash of his pen the 
agriculture, the breeding of cattle, the mining, or the commerce 
of a nation, will perform his business the better, the better he 

* Those who deny the progressive influence of human reason, must have 
studied history to very little purpose. The perfidy and cruelty of war has 
considerably abated, in Europe, more than in Asia or America, and most of 
all amongst the most polished of the European nations. The ungenerous 
character of some recent military enterprises roused so much public indig- 
nation, as to make them recoil upon the projectors with ruinous violence. 

•f I am here speaking of the only sure reliance in an enlightened age. A 
people, that has nothing to lose by a change of domination, may defend it- 
self with the most determined gallantry. The Mussulman will rush on 
certain destruction, in the cause of a prince and a faith, that are neither of 
them worth defending. But political and religious prejudice will sooner or 
later fall to the grotmd ; and leave mankind to seek for some more reasona- 
We object of devotion. 

58 



394 ON. CONSUMPTION. book uu 

understands the nature of things, and the more his understand- 
ing is enhghtened. . 

For this reason, every advance of science is followed by an 
increase of social happiness. A new application of the lever, or 
of the power of wind or water, or even a method of reducing 
the friction of bodies, will, perhaps, have an influence on twenty 
different aits. An uniformity of weights and measures, arranged 
upon mathematical principles, would be a benefit to the whole 
commercial world, if it were wise enough to adopt such an ex- 
pedient. An important discovery in astronomy or geology may 
possibly afford the means of ascertainmg the longitude at sea 
with precision; which would be an immense advantage to naviga- 
tion all over the world. The naturahzation in Europe of a new 
botanical genus or species might possibly influence the comfort 
of many millions of individuals.* 

Among the numerous classes of science, theoretical and prac- 
tical, which it is the interest of the public to advance and pro- 
mote, there are fortunately many, that individuals have a person- 
al interest in pursuing, and which the pubhc, therefore, is not 
called upon to pay the expense of teaching. Every adventurer 
in any branch of industry is urged most strongly by self-interest 
to learn his business and whatever concerns it: the journeyman 
gains in his apprenticeship, besides manual dexterity, a variety 
of notions and ideas only to be learnt in the work-shop, and 
which can be no otherwise recompensed, than by the wages he 
will receive. 

But it is not every degree or class of knowledge, that yields a 
benefit to the individual, equivalent to that accruing to the public. 
In treating above"!" of the profits of the man of science, I have 
shown the reason, why his talents are not adequately remunerat- 
ed; yet theoretical is quite as useful to society as practical know- 
ledge ; for how could science ever be ^pphed to the practical 
utility of mankind, unless it were discovered and preserved by 
the theorist 1 It would rapidly degenerate into mere mechanical 
habit, which must soon decline;. and the downfal of the arts 
would pave the way for the return of igrorance and barbarism. 

In every country that can at all appreciate the benefits to be 
derived from the enlargement of human faculties, it has been 
deemed by no means a piece of extravagance, to support acade- 
mies and learned institutions', and a limited number of very supe? 
rior schools, intended not as mere repositories of science, and of 
the most approved modes of instruction, but as a means of its 

* Should the expected success attend the attempt to naturalize in Eu- 
rope tlie.flax of New-Zealand, which is greatly superior to that of Europe 
in the length and delicacy of the fibre, as well as in the abundance of the 
crop, it is possible that fine linen may be produced at the rate now paid for 
the coarsest quality ; which would greatly improve the cleanliness and 
health of the lower classes. 

t Book II. chap. 7, sect. 2. 



CHAP. VI. ON CONSUMPTION. 395 

still further extension. But it requires some skill in the manage- 
ment, to prevent such establishments from operating as an impe- 
diment, instead of a furtherance, to the progress of knowledge, 
and as an obstruction rather than as an avenue to the improve- 
ment of education. Long before the revolution, it had become 
notorious, that most of our French universities had been thus 
perverted from the intention of their founders. All the principal 
discoveries were made elsewhere; and most of them had to en- 
counter the weight of their influence over the rising generation 
and credit with men inpov/er.*(l) 

From this example, we may see how dangerous it is, to en- 
trust them with any discretionary control. If a candidate pre- 
sents himself for examination, he must not be referred to teach- 
ers, who are at the same time judges and interested parties, sure 
to think well of their own scholars, and ill of those of every body 
else. The merit of the candidate should alone decide, and not 
the place where he happens to have studied, nor the length of his 
probation; for to oblige a student in any science, medicine for 

*^What was denominated an University, under the reign of Napoleon, 
was a still more naiscliievous institution ; being, in fact, but a most expen- 
sive and vexatious contrivance, for depraving tlie intellectual faculties of 
the rising generation, by substituting, in the place of just and correct no- 
tions of things, opinions calculated to perpetjiate the political slavery of 
their country. - ; ' 



(1) ["It is chiefly," observes Dugald Stewart, " in-judging of questions 
coming home to their business and. bosoms, that casual associations lead 
mankind astray ; and of such associations, how incalculable is the number 
arising from false systems of religion, oppressive forms of governm.ent, and 
absurd plans of education ! The consequence is, that while the physical 
and mathematical discoveries of former ages present themselves to the hand 
of the historian, like masses of pure and native gold, the truths which we 
are here in quest of may be compared to iron, which, although at once the 
most necessary and the most, widely diffused of all the metals, commonly 
requires a discriminating eye to detect its existence, and a tedious as well 
as, nice process, to extract it from the ore." 

"To the same circumstance it is owing, that improvements in Moral and 
in Political Science do not strike the imagination with nearly so great force 
as the discoveries of the Mathematician or of the Chemist. When an inve- 
terate prejudice is destroyed by extirpating the casual associations on which 
it' was grafted, how powerful is the new impulse given to the intellectual 
factilties of man! Yet how slow and silent tjje process by which the effect 
is accomplished ! Were it not, indeed, for a certain class of learned authors, 
who, from time to time, heave the log into the deep, we should hardly be- 
lieve that the reason of the species is progressive. In this respect, Jhe re- 
hgious and academical establishments in some parts of Europe are not 
without their use to the historian of the human mind. Immovably moor- 
ed to the same station by the strength of their cables, and the weight of 
their anchors, they enable him to measure the rapidity of the current by 
which the rest of the world are borne along." 

Vide Preface to Stewart's Disseiiations, p. 28, Boston edition.] 

American EniTOR. 



396 ON CONSUMPTION. book uu 

instance, to learn it at a particular place, is, possibly, to prevent 
his learning it better elsewhere; and, to prescribe any fixed rou- 
tine of study, is, possibly, to prevent his fixing a shorter road. 
Moreover, in deciding upon comparative merit, there is much 
unfairness to be apprehended from the esprit de corps of such 
communities. 

Encouragement may, with perfect safety, be held out to a 
mode of instruction of no small efficacy ; I mean, the composition 
of good elementary* works. The reputation and profit of a good 
book in this class do not indemnify the labour, science, and skill, 
requisite to its composition, (a) A man must be a fool to serve 
the public in this line where the natural profit is so little propor- 
tioned to the benefit derived to the public. The want of good 
elementary books will never be thoroughly supplied, until the 
public shall hold out temptations, sufficiently ample to engage 
first-rate talents in their composition. It does not answer to 
employ particular individuals for the express purpose ; for the 
man oFmost talent will not always succeed the best: nor to offer 
specific premiums; for they are often bestowed on very imper- 
fect productions, and the encouragement ceases the moment the 
premium is awarded. But merit in this kind should be paid pro- 
portionately to its degree, and always liberally. A good work 
will thus be sure to be superseded by a better, till perfection is 
at last attained in each class. And I must observe, by the way, 
that there is no great expense incurred by liberally rewarding ex- 
cellence; for it must always be extremely rare; and what is a 
great sum to an individual, is a small matter to the pockets of a 
nation. 

These are the kinds of instruction most calculated to promote 
national wealth, and most likely to retrograde, if not in some mea- 
sure supported by the public. There are others, which are es- 
sential to the softening of national manners, and stand yet more 
in need of that support. 

When the useful arts have arrived at a high degree of perfec- 
tion, and labour has been very generally and minutely subdivid- 
ed, the occupation of the lowest classes of labourers is reduced 
to one or two operations, for the most part simple in themselves, 

* Under this head, I would include, the fundamental parts of knowledge 
in every department, and the familiar instruction adapted to each specific 
calling, respectively ; such as would impart at a cheap rate to the hatter, 
the metal-founder, the potter, the dyer, &c. the general principles of their 
respective arts. Works of this kind keep up a constant channel of commu- 
nication between the practical and theoretical branches, and enable them 
to profit mutually by each other's experience. 



(a) This can only be true where the. demand for such works is limited. 
In England, works of instruction are probably amongst the most profitable 
to the authors. T. 



CHAP. VI. ON CONSUMPTION. 397 

and continually repeated : to these their whole thought and atten- 
tion are directed; and from them they are seldom diverted by 
any novel or unforeseen occurrence : their intellectual faculties, 
being rarely or never called into play, must of course be degrad- 
ed and.brutified, and themselves rendered incapable of uttering 
two words of common sense out of their peculiar line of business, 
and utterly devoid of any generous ideas or elevated notions. 
Elevation of mind is generated by enlarged views of men and 
things, and can never exist in a being incapable of conceiving 
the general bearings and connexions of objects. A plodding- 
mechanic can conceive no connexion between the inviolability 
of property and public prosperity, or how he can be more inte- 
rested in that prosperity, than his more wealthy neighbour; but 
is apt to consider all these capital benefits as so many encroach- 
ments on his rights and happiness. A certain degree of edu- 
cation, of reading, of reflection while at work, and of intercourse 
with persons of his own condition, will open his mind to these 
conceptions, as well as introduce a little more delicacy of feeling 
into his conduct, as a father, a husband, a brother, or a citizen. 

But, in the vast machinery of national production, the mere 
manual labourer is so placed, as to earn little or nothing more 
than a bare subsistence. The most he can do is, to rear his 
young family, and bring them up to some occupation: he can 
not be expected to give them that education, which we have sup- 
posed the well-being of society to require. If the community 
wish to have the benefit of more knowledge and intelligence in 
the labouring classes, it must dispense it at the public charge. 

This object may be obtained by the establishment of primary 
schools, of reading, writing, and arithmetic. These are the 
groundwork of all knowledge, and are quite sufficient for the ci- 
vilization of the lower classes. In fact, one can not call a nation 
civilized, nor, consequently, possessed of the benefits of civili- 
zation, until the people at large be instructed in these three par- 
ticulars : till then it will be but partially reclaimed from barbar- 
ism. With the help of these advantages alone, it may safely be 
affirmed, that no transcendant genius or superior mind will long 
remain in obscurity, or be prevented from displaying itself to the 
infinite benefit of the community. The faculty of reading alone 
will, for a few sous, put a man in possession of all that eminent 
men have said or done in the line, to which the bent of genius 
impels. Nor should the female part of the creation be shut, out 
from this elementary education ; for the public is equally inte- 
rested in their civilization ; and they are indeed the first, and 
often the only teachers of the rising generation. 

It would be the more unpardonable in governments to neglect 
the business of education, and abandon to their present igno- 
rance the great majority of the population in those nations of 
Europe, that pretend to the character of refinement and civiliza- 



398 ON CONSUMPTION. book in. 

tion, now that the improved methods of mutual instruction, that 
have been tried with such complete success, afford a ready and 
most economical means of universally diffusing knowledge 
amongst the inferior classes.* 

_ Thus, none but elementary and abstract science, — the.highest 
and the lowest branches of knowledge, are so much less favoured 
in the natural course of things, and so little stimulated by the 
competition of demand, as to require the aid of that authority, 
which is created purposely to watch over the public interests. 
Not that individuals have no interest in the support and promo- 
tion of these, as well as of the other, branches of knowledge; 
but they have not so direct an interest, — the loss occasioned by 
their disappearance is neither so immediate nor so perceptible ; 
a flourishing empire might retrograde, until it reached the con- 
fines of barbarism, before individuals had observed the operating 
cause of its decline. 

I would not be understood to find fault with public establish- 
ments for purposes of education, in other- branches than those I 
have been describing. I am only endeavouring to show, in what 
branches a nation may wisely, and with due regard to its own 
interest, defraylhe charge out of the public purse. Every diffu- 
sion of such knowledge, as is founded upon fact and experience, 
and does not proceed upon dogmatical opinions and assertions, 
every kind of instruction, that tends to improve the taste and un- 
derstanding, is a positive good; and, consequently, an institution 
calculated to diffuse it must he beneficial. ' But care must be ta- 

* According to the new method, introduced by Lancaster, and perfected 
by subsequent teachers, a sing-le master with very little aid of books, pens, 
or paper, can rapidly and effectually teach reading, writing, and vulgar 
arithmetic, to five or six hundred scholars at a time. This truly economi- 
cal result is produced, by taking advantage of the slightest superiority of 
intelligence of one above another, and directing the motive of emulation, 
natmal to the human breast, towards an useful object. A large school is 
commonly divided into forms, consisting each of eight- children, as nearly 
equal in advancement as possible, and instructed by a child somewhat more 
advanced, called The Monitor. These forms again a,re divided into eight 
classes; of which the lovrest learns to pronomice the letters of the alphabet, 
and to trace their figures rudely with the finger upon sand spread put upon 
a flat board; and the highest is able to write on paper, and to practise the 
four rules of arithmetic. The children of each form are ranged according 
to their progress; and whoever can not give the answer, is immediately su- 
perseded by a more ' apt scholar. As soon as a child is perfected in one 
class, he is transferred to the next in degree. The lessons are received, 
sometimes in a sitting posture, and sometimes upright, with slates affixed 
to the walls. The instruction is thus always accommodated to the age and 
faculties of the child; it necessarily arrests and rewards his attention; and 
involves that personal activity, essential to the infant frame. The whole 
is conducted in a single apartment, and usually under the superintendence 
of a single master or mistress. The general adoption of this method will 
probably be for some time opposed by custom and prejudice ; but its utility 
and conformity to the order of nature will insure its ultimate and univer- 
sal prevalence. 



CHAP. VI. ON CONSUMPTION. 399 

ken, that encouragement of one branch shall not operate to dis- 
courage another. This is the general mischief of premiums 
awarded by the public ; a private teacher or institution will not 
be adequately paid, where the same kind of instruction is to be 
had for nothing, though perhaps, from inferior teachers. There 
is, therefore, some danger, that talent may be superseded by me- 
diocrity; and a check be given to private exertions, from which 
the resources of the state might expect incalculable benefit. 

The only important science, which seems to me not suscepti- 
ble of being taught at the public charge, is that of Moral Philo- 
sophy, which may be considered as either experimental or doc- 
trinal. The former consists in the knowledge of moral quali- 
ties, and of the chain of connexion between events dependent 
upon human will ; and forms indeed a part of the study of man, 
which is best pursued by social converse and intercourse. The 
latter is a series of maxims and precepts, possessing very little 
influence upon human conduct, which is best guided in the rela- 
tions of public and of private life, by the operation of g&od laws, 
of good education, and of goad example.* 

The sole encouragement to virtue and good conduct, that can 
be relied on, is, the interest that every body has in discovering 
and employing no persons but those of good character. Men the 
most independent in their circumstances want something more 
to make them happy; that is to say, the general esteem and 
good opinion of their fellow-creatures: and these can only be ac- 
quired by putting on the appearance at least of estimable quali- 
ties, which it is much easier to acquire than to stimulate. The 
influence of the sovereign or ruling body, upon the manners of 
the nation, is very extensive, because it employs a vast number 
of people ; but it operates less beneficially than that of individuals, 
because it is less interested in employing none but persons of in- 
tegrity. If to its lukewarmness in this particular be added, the 
example of immorality and contempt for honesty and economy 
too frequently held out to the people by their nilers, the corrup- 
tion of national morals will be wonderfully accelerated, "j" But a 
nation may be rescued from moral degradation by the re-action 
of opposite causes. Colonies are, for the most part, composed 

* I am strongly disposed to say the same of logic. Were nothing taught, 
but what is consistent with truth and good sense, logic would follow of it- 
self as a matter of course : all the teaching in the world will never make a 
man a good reasoner, whose notions and ideas of things are unsound and 
erroneous ; and, with the foundation of just notions, he will require no ' 
teaching to make him reason well. Just ideas of things are only to be ac- 
quired by attentive examination ; by taking account of every particular 
concerning them, and of nothing but what concerns them ; which is the ob- 
ject of all knowledge in general, and by no means of logic alone- 

t The bad example of a vicious prince is of the most fatal tendency ; it is 
notorious to all the world, and protected and abetted by public authority ; 
and it is sure to be reflected by the subservience of courtiers to theextreme 
point of imitative servility. 



400 ON CONSUMPTION. book hi. 

of by no means the most estimable classes of the mother-coun- 
Ity : in a very short time, however, vi'hen the hopes of return are 
wholly abandoned, and the settlers have made up their minds to 
pass the rest of their. lives in their new abode, they gradually feel 
the necessity of conciliating the esteem of their fellow-citizens, 
and the morals of the colony improve rapidly. By morals, I mean, 
the general course of human conduct and behaviour. 

These are the causes, that have a positive influence upon na- 
tional morality. To these must be added, the effect of education 
in general, in opening the eyes of mankind to their real interests, 
and softening the temper and disposition. 

Religious instruction ought, strictly speaking, to be defrayed 
by the respective religious communions and societies, each of 
which regards the opinions of the rest as heretical, and naturally 
revolts at the injustice of contributing to the propagation of what 
it deems erroneous, if not criminal, (a) 

Of the Charges of Public Benevolent Institutions. 

It has been much debated, whether individual distress has any 
title to public relief. I should say none, except inasmuch as it is 
an unavoidable consequence of existing' social institutions. If in- 
firmity and want be the effect of the social system, they have a 
title to public relief; provided always, that it be shown, that the 
same system affords no means of prevention or cure. But it would 
be foreign to the matter to discuss the question of right in this 
place. All we need do is, to consider benevolent institutions with 
regard to their nature and consequences. 

When a community establishes at the public charge arty insti- 
tution for benevolent purposes, it forms a kind of saving-bank, to 
which every member contributes a proportion of his revenue, to 
entitle him to claim a benefit, in the event of accident or misfor- 
tune. The "wealthy are generally impressed with an idea, that 
they shall never stand in need of public charitable relief; but a 
little less confidence would become them better. No man can 
reckon in his own case upon the continuance of good fortune, 
with as much certainty as upon the permanence of wants and in- 



(ffl) These considerations would lead to the much agitated question, of the 
justice and expediency of a national church, which it would be tedious to 
enlarge upon. Suffice it to say, that, in like manner as the improving mo- 
rality of a nation makes the duties of civil government gradually less volu- 
minous and requisite ; so its improving knowledge renders the lessons of the 
pulpit less efficacious and less necessary. Wherefore, it should seem, that 
the clerical body, being thus eased of great part of their labours, should be 
made available to the state for other purposes ; as for that of diffusing and 
perpetuating primary instruction, and the like ; or should be reduced in 
numbers and emolument, in proportion to the reduction of their utility. For 
a national church, as before observed, is a mere civil institution. T. 



CHAP. VI. ON CONSUMPTION. 401 

firtnities: the former may desert him; but the latter are insepara- 
ble companions. It is enough to know, that good fortune is not 
inexhaustible, to infuse an apprehension, that it may some day 
or other be exhausted : one has but to look round, and this ap- 
prehension will be confirmed by the experience of numbers, 
whose misfortunes were to themselves quite unexpected. 

Hospitals for the sick, alms-houses, and asylums for old age 
and infancy, inasmuch as they partially relieve the poorer classes 
from the charge of maintaining those, who are naturally depend- 
ent on them, and thereby to allow population to advance some- 
what more rapidly, have a natural tendency a little to depress the 
wages of labour. That depression would be greater still, if such 
establishments should be so multiplied, as to take in all the sick, 
aged, and infants of those classes, who would then have none 
but themselves to provide for out of their vyages. If they were 
entirely done away, there would be some rise of wages, although 
not sufficient to maintain so large a labouring population, as may 
be kept up with their help; for the demand for their labour would 
be somewhat reduced by the advance of its price. 

From these two extreme suppositions, we may judge of the 
effect of those efforts to relieve indigence, which all nations have 
made in some degree or other ; and see the reason, why the dis- 
tress and relief go on increasing together, although not exactly 
in the same ratio. 

Most nations preserve a middle course between the two ex- 
tremes, affording public relief to a part only of those, who are 
helpless from age, infancy, or casual sickness. Of the rest they 
endeavour to rid themselves in one of two ways ; either by re- 
quiring certain qualifications in the applicants, whether of age, of 
specific disease, or, perhaps, of mere interest and favouritism; or 
by limiting narrowly the extent of the relief, giving it upon hard 
terms to the applicants, or attaching some degree of shame to 
the acceptance.* 

It is a distressing reflection, that there are no othei" methods 
of confining the number of applicants for relief within the means 
available to the community, except the offer of hard conditions, 
or the want of a patron. ; It were to be desired, that asylums of 
the more comfortable class, instead of favouritism, should be open 
to unmerited misfortune only ; and that, to prevent improper nomi- 
nations, the pretensions of the candidate should be ascertained by 
the inquest of a jury. Thv'5 rest can probably be protected from 

* At Paris, the limitation of relief afforded by the Hospice des Incurables, 
and those of Petites Maisons, of St. Louis, of Charite, and many others, is 
of the former kind; the admissions, to the Hotel-Dieu, Bicetre, Saltpeiriere, 
and Enfans-Trouves, are subject to a limitation of the latter kind. As the 
number of applicants duly' qualified for. admission in the establishment first 
mentioned always exceeds their capacity, the choice must ultimately be 
decided by favour or interest. 

59 



402 ON CONSUMPTION. book hi. 

too great an influx of indigence, by no other means consistent 
with humanity, except the observance of severe, though impar- 
tial, disciphne, sutficient to invest them \vith some degree of 
terror. 

This evil does not apply to the asylums devoted to invalid sol- 
diers and sailors. The qualitication is so plain and intelligible, 
that the doors ought to be shut against none who are possessed 
of it; and the comforts of the institution can never increase the 
nimiber of applicants. Their being nursed in the public asylums 
with the same domestic care and comlbrt, as are lo be found in 
the homes of persons of the same class in life, and indulged in 
repose, and some even of the whims of old age, will undoubtedly 
somewhat enhance the charge, that is to say, so ta.r as it might 
prolong lives, that otherwise might fall a sacritice to wretched- 
ness; but this is the utmost increase of charge; and it is one, that 
neither patriotism nor humanity will grudge.* 

The houses of Industry, that are multiplying so rapidly in 
America, Holland, Germany, and France, are noble and excel- 
lent institutions of public benevolence. They are designed to 
provide all persons of sound health with work according -to their 
respective capacities ; some of them are open to any workman 
out of employ, that chooses to apply; others are a kind of houses 
of correction, where vagrants, beggars, and otlenders, are kept 
to work for fixed periods. Convicts have sometimes been set to 
hard labour in their respective vocations, during their contine- 
ment ; whereby the public has been wholly or partially relieved 
from the charge of keeping up gaols, and a method contrived for 
reforming the morals of the criminals, and rendering them a 
blessing, instead of a curse, to society. 

Indeed, such establishments can hardly be reckoned among 
the items of public charge ; for, the moment their production 
equals their consumption they are no longer an incuinbrance to 
any body. They are of immense benefit in a dense population, 
where, amidst the vast variety of occupations, some must un- 
avoidably be in a state of temporary inaction. The perpetual 
shiftings of commerce, the introduction of new processes, the 
withdrawing of capital from a productive concern, accidental tire, 
or other calamity, may throw numbers out of employment; and 
the most deserving individual may, without any fault of his own, 
be reduced to the extreme of want. In these institutions, he is 
sure of earning at least a subsistence, if not in his own hue, in 
one of a smilar description. 

* Yet it is well wortli consideration, wlietlici- it be not more to the ad- 
vaaitage, both of tlie state and of its pensioners, to maintain them at tlieir 
own homes upci a fixed income, or to board them out with individuals. Tiie 
Abbe de St. i'n'nr, whose mind was ever actively at work tor the public 
grood, has estimated the charge of maintaining; the invalids in their sumji- 
tuous establishment at Paris, to be three times -as much as that of their 
maintenance at their respective homes. Annalcs Polit. p. 209. 



CHAP. VI. ON CONSUMPTION. 403 

The grand obstacle to such estabUshments is, the great outlay 
of capital they require. They are adventures of industry, and as 
such must iDe provided with a variety of tools, implements, and 
machines, besides raw material of different kinds to work upon. 
Before they can be said to maintain themselves, they must earn 
enough to pay the interest of the capital embarked, as well as 
their current expenses. 

The favour shown them by the public authority, in the gratui- 
tous supply of the capital and buildings, and in many other par- 
ticulars, would make them interfere with private Undertakings, 
were they not subject, on the other hand, to some peculiar dis- 
advantages. They are obliged to confine their operations to such 
kinds of work, as sort with the feebleness and general inferiority 
in skill of the inmates, and can not direct them to such as may 
be most in demand. Moreover, it is in most of them a matter 
of regulation and police, to lay by always the third or fourth part 
of the labourer's wages or earnings, as a capital to set him up, 
on his quitting the establishment: this is an excellent precaution, 
but prevents their working at such cheap rates, as to drive all 
competition out of the market. 

Although the honour, attached to the direction and manage- 
ment of institutions of public benevolence, will generally attract 
the gratuitous service of the affluent and respectable part of the 
community, yet, when the duties become numerous and labori- 
ous, they are commonly discharged by gratuitous administrators 
with the most unfeeling negligence. It was probably by no 
means wise, to subject all the hospitals of Paris to a general su- 
perintendence. At London, each hospital is separately adminis- 
tered ; and the whole are managed with more economy and at- 
tention in consequence. A laudable emulation is thereby excited 
amongst tlte managers of rival establishments ; which affords an 
additional proof of the practicability and benefit of competition in 
the business of public administration. 

Of the Charges of Public Edifices and Worlcs. 

I shall not here attempt to enumerate the great variety of 
works requisite for the use of the public ; but merely lay down 
some general rules, for calculating their cost to the nation. It 
is often impossible to estimate with any tolerable accuracy the 
public benefit derived from them. How is one to calculate the 
utility, that is to say, the pleasure, which the inhabitants of a 
city derive from a public terrace or promenade 1 It is a positive 
benefit to have, within an easy distance of the close and crowded 
streets of a populous town, some place where the population can 
breathe a pure and wholesome atmosphere, and take health and 
exercise, under the shade of a grove, or with a verdant prospect 
before the eye ; and where school-boys can spend their hours of 



404 ON CONSUMPTION. book in, 

recreation ; yet this advantage it would be impossible to set a 
precise value upon. 

The amount of its cost, however, may be ascertained or es- 
timated. The cost of every public work or construction con- 
sists : — 

1. Of the rent of the surface whereon it is erected; which 
rent amounts to what a tenant would give for it to the proprietor. 

2. Of the interest of the capital expended in the erection. 

3. Of the annual charge of maintenance. 

Sometimes, one or more of these items may be curtailed. 
When the soil, whereon a public work is erected, will fetch no- 
thing from either a purchaser, or a. tenant, the public will be 
charged with nothing in the nature of rent ; for no rent could be 
got if the spot had never been built on. A bridge, for mstance, 
costs nothing but the interest of the capital expended in its con- 
struction, and the annual charge of keeping it in repair. If it be 
suffered to fall into decay, the public consumes, annually, the 
agency of the capital vested, reckoned in the shape of interest 
on the sum expended, and, gradually, the capital itself, into the 
bargain ; for, as soon as the- bridge ceases to be passable, not 
only is the agency or rent of the capital lost, but the capital is 
gone likewise. 

Supposing one of the dikes in Holland to have cost in the out- 
set, 100,000/r. ; the annual charge on the score of interest,, at 
5 per cent, will be 5000/r. ; and, if it cost 3000 /r. more in the 
keeping it up, the total annual charge will be SOOO/r. 

The same mode of reckoning may be applied to roads and ca- 
nals. If a road be broader than necessary, there is annually a 
loss of the rent of all the superfluous land it occupies, and, be- 
sides, of all the additional charge of repair. Many of the roads 
out of Paris are 180 feet wide, including the unpaved part on 
each side ; whereas, a breadth of 60 feet would be full wide for 
all useful purposes, and would be quite magnificent enough, even 
for the approaches to a great metropolis. The surplus is only 
so much useless splendour ; indeed, I hardly know how to call 
it so ; for the narrow pavement in the centre of a broad road, 
the two sides of which are impassable the greater part of the 
year, is an equal imputation upon the liberality, and upon the 
good sense and taste of the nation. It gives a disagreeable sen- 
sation, to see so much loss of space, more particularly if it be 
badly kept. It appears like a wish to have magnificent roads, 
without having the means of keeping them uniform and in good 
condition ; like the palaces of the Italian nobles, that never feel 
the effects of the broom. 

Be it as it may, on the sides of the road I anv speaking of, 
there is a space of 120 feet, that might be restored to cultiva- 
tion ; that is to say, 50 arpens to the ordinary league. Add to- 
gether the rent of the surplus land, the interest of the sum ex- 



CHAP. VI. ON CONSUMPTION. 405 

pended in the first cost and preparation, and the annual charge of 
keeping up the unnecessary space, which is something, badly as 
it is kept up; you will then ascertain the sum France pays annu- 
ally for the very questionable honour of having roads too wide, 
by more than the half, leading to streets too narrow, by three- 
fourths.* 

Roads and canals are costly public works, even in countries 
where they are under judicious and economical management. 
Yet, probably, in most cases, the benefits they afford to the com- 
munity far exceed the charges. Of this the reader may be con- 
vinced, on reference to what has been said above of the value 
generated by the mere commercial operation of transfer from one 
spot to another,! and of the general rule, that every saving in the 
charges of production is so much gain to the consumer. J Were 
we to calculate, what would be the charge of carriage Upon all 
the articles and commodities, that now pass along any road in 
the course of a year, if the road did not exist, and compare it 
with the utmost charge under present circumstances, the whole 
difference, that would appear, will be so much gain to the con- 
sumers of all those articles, and so much positive and clear net 
profit to the community. § 

Canals are still more beneficial ; for in them the saving of car- 
riage is still more considerable. j| 

Public works of no utility, such as palaces, triumphal arches, 
monumental columns, and the like, are items of national luxury. 
They are equally indefensible, with instances of private prodi- 
gality. The unsatisfactory gratification, afforded by them to the 
vanity of the prince or the people, by no means balances the cost, 
and often the misery, they have occasioned. 

* With all tliis waste of space in the great roads of France, there are in 
nbne of them either paved or gravelled foot-ways, passable at seasons, or 
stone seats, for the passengers to rest upon, or places of temporary shelter 
from the weather, or cisterns to quench the thirst ; all which might be add- 
ed with a very trifling expense. 

t Book I. chap. 9. t Book II. chap. 3 

§ To say, that, if the road were not in existence, the charge of transport 
could never be so enormous as here suggested, because the transport would 
never take place at all, and people would contrive to do without the objects 
of transport, would be a strange way of eluding the argument. Self-denial 
of this kind, enforced by the want of means to purchase, is ati instance of 
poverty, not of wealth. The poverty of the consumer is extreme, in respect 
to every object he is thus made too poor to purchase : and he becomes richer 
in respect to it, in proportion as its price or value declines. 

II In lieu of canals, iron rail-roads frorn one town to another, will probably 
be one day constructed. The saving in the costs of transport would proba- 
bly exceed the interest of the very heavy expense in the outset. Besides 
the additional fa,cility of movement, roads of this kind would remedy the 
violent jolting of passengers and goods. Undertakings of such magnitude 
can only be prosecuted in countries, where capital is very abundant, and 
where the government inspires the adventurers with a firm assurance of 
reaping themselves the profit of the adventure. 



406 ON CONSUMPTION. book ni. 



CHAPTER VII. 

OF THE ACTUAL CONTRIBUTORS TO PUBLIC CONSUMPTION. 

A PORTION of the objects of public consumption have,, in some 
very rare instances, been provided by a private individual. Yfe 
see occasional acts of private munificence, in the erection of a 
hosptial, the laying out of a road, or of public gardens, upon the 
land, and at the cost, of an individual. In ancient times, ex- 
amples of this kind were more frequent though much less raerir 
torious. The private opulence of the ancients vs^as commonly 
the fruit of domestic, or provincial, plunder and speculation, or 
perhaps the spoil of a hostile nation, purchased with the blood 
of fellow-citizens. Among the moderns, though such excess do 
sometimes occur, individual wealth is, in the great majority of 
cases, the fruit of pev^iOnal industry and economy. In England, 
wh§re there are so man j institutions founded and supported by 
private funds, most of the fortunes of the founders and sup- 
porters have been acquired in industrious occupations. It re- 
quires a greater exGFtioi;! of generosity to sacrifice wealth, ac- 
quired by a long course of toil and self-denial, than to give away 
what has been obtained by a stroke of good fortune, or even by 
an act of lucky temerity. 

Among the Romans, a further portion of the public consump- 
tion was supplied directly by the vanquished nations who were 
subjected to a tribute, which the victors consumed. 

In most modern states (a), there is some territorial property 
vested, either in the nation at large, or in the subordinate com- 
munities, cities,-towns, and villages, which is leased out, or occu- 
pied directly by the public. In France, most of the public lands 
of tillage and pasturage, with their appurtenances, are let out on 
lease ; the government reserving only the national forests under 
the direct administration of its agents. The produce of the 
whole forms a considerable item In the catalogue of public re- 
sources. 

But these resources consist for the most part of the produce 
of taxes, levied upon the subjects or citizens. These taxes are 
sometimes national ; i. e. levied upon the whole nation, and paid 
into the general treasury of the state, whence the public national 
expenditure is defrayed ; and sometimes local, or provincial, 



(a) And in most of those of antiquity. T. 



CHAP. vir. ON CONSUMPTION. 407 

«. e. levied upon the inhabitants of a separate canton, or province 
only, and paid into the local treasury, whence are defrayed the 
local expenses. 

It is a principle of equity, that consumption should be charged 
to those, who derive gratiiication from it ; consequently, those 
countries rriust be pronounced to be the best governed, in re- 
spect of taxation, where each class of inhabitants contributes in 
taxation proportionately to the benefit derived by it from the ex- 
penditure. 

Every individual and class in the cornmunity is benefited by 
the central administration, or, in, other words, the general govern- 
ment: so likewise of the security afforded by the national milita- 
ry establishment; for the provinces can hardly be secure from ex- 
ternal attack, if the enemy have possession of the metropolis, and 
can thence overawe and control them; imposing laws upon dis- 
tricts where his force has not penetrated, and disposing of the 
lives and property, even of such as have not seen the face of ah 
enemy. For the same reason the charge of fortresses, arsenals, 
and diplomatic agents is properly thrown upon the whole com- 
munity. 

It would seem, tha,t the administration of justice should be 
classed among the general charges, although the security and 
advantage it affords have more of a local character.— When the 
magistracy of Bordeaux arrests and tries an offender, the public 
internal security of France is unquestionably promoted. The 
charge of gaols and court-houses necessarily follows that of the 
magistracy. Smith has expressed an opinion, that civil justice 
should be defrayed by the litigating parties; which would be 
more practicable than at present, were the judges in the appoint- 
ment of the parties in each particular case, and no otherwise in 
the nomination of the public authority, than inasmuch as the 
choice might be limited to specified persons of approved know- 
ledge and integrity. They would then be arbitrators and a sort 
of equitable jurors, and might be paid proportionately to the mat- 
ter in dispute without regard to the length of the suit ; and would 
thus have an obvious interest in simplifying the process, and 
sparing their own time and trouble, as well as in attracting busi- 
ness by the general equity of tlieir decisions, (a) 



(a) Our author seems in this passage to have become a convert to the 
opinion of Smith, in respect to the civil tribunals of a nation, from which 
he had expressed his dissent, in former editions. Though arbitration may 
be a very good mode of settling civil suits, where the parties are both anx- 
ious to come to a settlement, and indeed is frequently resorted to, and 
should always be encouraged; yet it is manifest, that there must be a com- 
pulsory tribunal for the obstinate, or refractory. And, since security of 
person and property is the main object of social institutions, it is but just, 
that invasion in a particular instance should be repelled and deterred at the 
public charge. In strict justice, the invader should be held to made good 



408 ON CONSUMPTION. book hi. 

But local administration and local institutions of utility, plea- 
sure, instruction, or beneficence, appear to yield a benefit exclu- 
sively to the place or district where they are situated. — Where- 
fore, it should seem, that their expenses ought to fall, as in most 
countries they do, upon the local population. Not but that the 
nation at large derives some benefit from good provincial admi- 
nistration, or institutions. A stranger has access to the public 
places, libraries, schools, walks, and hospitals of the district ; 
but the principal benefit unquestionably results to the immediate 
neighbourhood. 

It is good economy to leave the administration of the local re- 
ceipts and disbursements to the local authorities ; particularly 
where they are appointed by those, whose funds they administer. 
There is much less waste, when the money is spent under the 
eye of those, who contribute it, and who are to reap the benefit; 
besides, the expense is better proportioned to the advantage ex- 
pected. When one passes through a city or town badly paved 
and ill-conditioned, or sees a canal or harbour in a state of di- 
lapidation, one may conclude, in nine cases out of ten, that the 
authorities, who are to administer the funds appropriated to those 
objects, do not reside on the spot. 

In this particular, small states have an advantage over more 
extensive ones. They have more enjoyment from a less expen- 
diture upon objects of public utility or amusement; because they 
are at hand to see that the funds, destined to the object, are 
faithfully applied. 



CHAPTER VIII. 

OF TAXATION, (a) 

SECTION I. 

Of the Effect of all kinds of Taxation in general. 

Taxation is the transfer of a portion of the national products 
from the hands of individuals to those of the government, for the 

the whole damage ; and so he is, or ought to be, in the shape of costs, fine, 
daniages, or otherwise. But it is not consistent with equity that the suf- 
ferer should be deterred from pursuing his claim, by superadding a propor- 
tion of the outlay upon the judicial establishment to the charge of witnesses 
and agents, which he must necessarily advance, and to the risk of inability 
in the delinquent, even in the event of ultimate success. T. 



(a) Vlmpot, expressed in English by the general term, taxation, as dis- 
tinguished from impot, tax, the particular term. T. 



CHAP. viii. ON CONSUMPTION. 409 

purpose of meeting the public consumption or expenditure. What- 
ever be the denomination it bears, whether tax, contribution, 
duty, excise, custom, aid, subsidy,* grant, or free gift, it is vir- 
tually a burthen imposed upon individuals, either in a separate or 
corporate character, by the ruling power for the time being, for 
the purpose of supplying the consumption it may think proper 
to make at their expense; in short, an impost, in the literal sense. 

It would be foreign to the plan of this work, to inquire in whom' 
the right of taxation is or ought to be vested.- In the science of 
political economy, taxation must be considered as matter of fact, 
and not of right ; and nothing further is to be regarded, than its 
nature, the source whence it derives the values it absorbs, and 
its effect upon national and individual interests. The province 
of this science extends no further. 

The object of taxation is, not the actual commodity, but the 
value of the commodity, given by the tax-payer to the tax-gather- 
er. Its being paid in silver, in goods, or in personal service, is 
a mere accidental circumstance, which may be more or less ad- 
vantageous to the subject or to the sovereign. The essential 
point is, the value of the silver, the goods, or the service. The 
moment that value is parted with by the tax-payer, it is positive- 
ly lost to him; the moment it is consumed by the government 
or its agents, it is lost to all the world, and never reverts to, or 
re-exists in society. This, I apprehend, has already been de- 
monstrated, when the general effect of public consumption was 
under consideration. It was there shown, that however the mo- 
ney levied by taxation may be refunded to the nation, its value is 
never refunded ; because it is never returned gratuitously, or re- 
funded by the public functionaries, without receiving an equiva- 
lent in the way of barter or exchange. 

The same causes, that we have found to make unproductive 
consumption nowise favourable to re-production, prevent taxa- 
tion from at all promoting it. Taxation deprives the producer 
of a product, which he would otherwise have the option of de- 
riving a personal gratification from, if consumed unproductively, 
or of turning to profit, if he preferred to devote it to an useful 

* What avails it, for instance, that taxation is imposed by consent of the 
people or their representatives, if there exist in the state a power, tiiat by 
its acts can leave the people no alternative but consent ? De Lolme in his 
Essay on the English Constitution, says that the right of the Crown to 
make war is nugatory, while the people have the right of refusing the sup- 
plies for carrying it on. May it not be said, with much more truth, that 
the right of the people to deny the supplies is nugatory, when the crown 
has involved them in a predicament, that makes consent a matter of neces- 
sity ? The liberties of Great Britain have no real security, except in the 
freedom of the press; which rests itself, rather upon the habits and opi- 
nions of the nation, than upon legal enactments or judicial decisions. A na- 
tion is free, when it is bent on freedom ; and the most formidable obstacle 
to the establishment of civil liberty is, the absence of the desire for it, 

"60 



410 ON CONSUMPTION. book in. 

employment. One product is a means of raising another; and, 
therefore, the subtraction of a product must needs diminish, in- 
stead of augmenting, productive power. 

It may be urged, that the pressure of taxation impels the pro- 
ductive classes to redouble their exertions, and thus tends to 
enlarge the national production. I answ^er, that, in the first place, 
mere exertion can not alone produce, there must be capital for it 
to w^ork upon, and capital is but an accumulation of the very pro- 
ducts, that taxation takes from the subject: that, in the second 
place, it is evident, that the values, which industry creates ex- 
pressly to satisfy the demands of taxation, are no increase of 
wealth; for they are seized on and devoured by taxation. It is a 
glaring absurdity to pretend, that taxation contributes to national 
wealth, by engrossing part of the national produce; and enriches 
the nation by consuming part of its wealth. Indeed, it would be 
trifling with my reader's time, to notice such a fallacy, did not 
most governments act upon this principle, and had not well in- 
tentioned and scientific writers endeavoured to support and estab- 
lish it.* 

If, from the circumstance, that the nations most grievously 
taxed are those most abounding in wealth, as Great Britain for 
example, we are desired to infer, that their superior wealth arises 
from their heavier taxation, it would be a manifest inversion of 
cause and effect. A man is not rich, because he pays largely; 
but he is able to pay largely, because he is rich. It would be 
not a little ridiculous, if a man should think to enrich himself by 
spending largely, because he sees a rich neighbour doing so. It 
must be clear, that the rich man spends, because he is rich; but 
never can enrich himself by the act of spending. 

Cause and effect are easily distinguished, when they occur in 
succession ; but are often confounded, when the operation is con- 
tinuous and simultaneous. 

Hence, it is manifest, that, although taxation may be, and of- 
ten is, productive of good, when the sums it absorbs are proper- 
ly applied, yet, the act of levying is always attended with mis- 
chief in the outset. And this mischief good princes and govern- 

* By the same reasoning it has been attempted to prove, that luxury, and 
barren consumption operate as a stimulus to production. Yet, they are 
less mischievous than taxation; inasmuch as they redound to the personal 
gratification of the party himself: whereas, to use the expedient of taxa- 
tion as a stimulative to increased production, is to redouble the exertions 
■ of the community, for the sole purpose of multiplying- its privations, rather 
than its enjoyments. For, if increased tas^ation be applied to the support 
of a complex, overgrown, and ostentatious internal administration, or of a 
superfluous and disproportionate military establishment, that may act as a 
drain of individual wealth, and of the flower of the national youth, and an 
aggressor upon the peace and happiness of domestic life, will not this be 
paying as dearly for a grievous public nuisance,, as if it were a benefit of 
the first magnitude ? 



CHAP. viir. ON CONSUMPTION. 411 

ments have always endeavoured to render as inconsiderable to 
their subjects as possible, by the practice of economy, and by 
levying, not to the full extent of the people's ability, but to such 
extent only, as is absolutely unavoidable. That rigid economy 
is the rarest of princely virtues, is owing to the circumstance of 
the throne being constantly beset with individuals, who are inte- 
rested m the absence of it: and who are always endeavouring, 
by the most specious reasoning, to impress the conviction, that 
magnificence is conducive to public prosperity, and that profuse 
public expenditure is beneficial to the state. It is the object of 
this third book to expose the absurdities of such representations. 
Others there are, who are not impudent enough to pretend, 
that* public profusion is a public benefit ; yet undertake to show 
by arithmetical deduction, that the people are scarcely burthened 
at all, and are equal to a much highe'- scale of taxation. As Sul- 
ly tells us in his Memoirs, ''The ear of the prince is assailed by 
a set of flattering advisers, \yho think to make their court to him 
by perpetually suggesting new ways of raising money; discharg- 
ed functionaries, for the most part, whose experience of the 
sweets of office has left no other impression, than the tincture of 
the baneful art of fiscal extortion ; and who seek to recommend 
themselves to power and favour, by commending it to the lips of 
royalty."* 

Others suggest financial projects, and ways and means for fill- 
ing the coffers of the prince, as they assert, without fleecing the 
subject. But no plan of finance can give to the government, 
without taking either from the people, or from the government 
itself in some other way ; unless it be a downright adventure of 
industry. Something can not be produced out of nothing by a 
mere touch of the wand. However an operation may be cloak- 
ed in mystery, however often we may twist and turn and trans- 
form values, there are but two ways of obtaining them; viz. cre- 
ating oneself, or taking from others. The best scheme of finance 
is, to spend as little as possible ; and the best tax is always the 
lightest. 

Admitting these premises, that taxation is the taking from in- 
dividuals a part of their property^ for public purposes ; that the 
value levied by taxation never reverts to the members of the com- 
munity, after it has once been taken from them ; and that taxa- 
tion is not itself a means of reproduction ; it is impossible to de- 

* Memoires, liv. xs. 

t It is hardly necessary to controvert an opinion, entertained by sove- 
reigns in times past, respecting the property of their subjects. We find 
Louis XIV. writing in these terms, professedly for the instruction of his son 
in matters of government ; " Kings are absolute lords naturally possessing 
the entire and uncontrolled disposal of all property, whether belonging to 
the church or to the laity, to be exercised at all times with due regard to 
economy, and to the general interests of the state. " CEuvres de Louis 
XIV., Memoires Hist. A. D. 1666. 



412 ON CONSUMPTION. book in. 

ny the conclusion, that the best taxes, or, rather those that are 
least bad, are 

1. Such as are the most moderate in their ratio. 

2. Such as are least attended with those vexatious circum- 
stances, that harass the tax-payer without bringing any thing in- 
to the public exchequer. 

3. Such as press impartially on all classes. 

4. Such as are least injurious to reproduction. 

6. Such as are rather favourable than otherwise to the nation- 
al morality; that is to say, to the prevalence of habits, useful 
and beneticicpl to society. 

These positions are almost self-evident ; yet I shall proceed 
to illustrate them successively,' with some few observations. 

1. Of such as are most moderate in their ratio. 

Since taxation does, in point of fact, deprive the tax-payer of 
a product,- which is to him, either a means of personal gratifica- 
tion, or a means of reproduction, the lighter the tax is, the les& 
must be the privation. 

Taxation, pushed to the extreme, has the lamentable effect, 
of impoverishing the individual, vvithout enriching the state. We 
may readily conceive how this can happen, if we recall to our at- 
tention the former position; viz. that each tax-payer's consump- 
tion, whether productive or not, is always limited to the amount 
of his revenue. No part of his revenue, therefore, can be taken 
from him, without necessarily curtailing his consumption in the 
same ratio. This must needs reduce the demand for all those 
objects he can no longer consume, and particularly those affect- 
ed by taxation. The diminution of demand must be followed by 
diminution of the supply of production; and, consequently, of the 
articles liable to taxation. Thus, the tax-payer is abridged of his 
enjoyments, the producer of his profits, and the public exchequer 
of its receipts.* 

* In France, before 1789, the aver.ag'e annual consumption of salt was 
estimated at 9 lbs., per head in the districts subject to the gabelle, and at 
18 lbs. per head in those exempt from that impost. De Monthieu, Influence 
des divers Impots, p. 141. Thus, taxation in this form obstructed the pro- 
duction of 1-2 of this article in the districts subjected to it, and reduced to 
1-2 the enjoyment it was capable of affording j-^ to say nothing- of the other 
mischiefs resulting' from it ;- the injmy to tillage, to the feeding- of cattle, 
and to the preparation of salted goods ; the popular animosity against the 
collectors of the tax, the consequent increase of crime and conviction, and 
the consigimient to the gallies of numerous individuals,.whose industry 
and courage might have been made- available to the increase of national 
opulence. 

In 1804, the English government raised the duties on sugar 20 per cent. 
It might have been expected, that their average product to the public ex- 
chequer would have been advanced in the same ratio; i. e. from 2,778,000/. 
the former amount, to 3,330,000Z. : instead of which, the' increased duties 
produced but 2,5-37,000Z. ; exliibiting an absolute deficit. Speech of Henry 
Brougham, Esq. M. P. March 13, 1817. ' - 

The people of Great Britain might consume f" rench wines at a very little 



CHAP. VIII. ON CONSUMPTION. 413 

This is the reason why a tax is not productive to the public 
exchequer, in proportion to its ratio ; and why it has become a 
sort of apophthegm, that two and two do riot make four in the 
arithmetic of finance. Excessive taxation is a kind of suicide, 
whether laid upon objects of necessity, or upon those of luxury; 
but there is this distinction, that, in the latter case, it extinguishes 
only a portion of the products on which it falls, together with the 
gratification they are calculated to afford ; while, in the former, 
it extinguishes both production and consumption, and the tax- 
payer himself into the bargain. 

Were it not almost self-evident, this principle might be illus- 
trated, by abundant examples of the profit the state derives from 
a moderate scale of taxation, where it is sufficiently awake to its 
real interests. 

When Turgot, in 1775, reduced to § the market-dues and du- 
ties of entry upon fresh sea-fish sold in Paris, their product was 
nowise diminished. The consumption of that article must, there- 
fore, have doubled, the fishermen and dealers must have doubled 
their concerns and their profits ; and, since population always 
increases with increasing production, the number of consumers 
must have been enlarged ; and that of producers must have been 
enlarged likewise ; for an increase of profits, that is to say, of 
individual revenue, multiplies savings, and thus generates the 
multiplication of capital and of families ; and that very increase 
of production vvill, beyond all doubt, augment the product of tax- 
ation in other branches ; to «ay nothing of the popularity accru- 
ing to the government from the alleviation of the national bur- 
thens. 

The government agents, who farm or administer the collec- 
tion of the taxes, very often abuse their interest and authority, 
to construe all doubtful points of fiscal law in their own favour, 
and sometimes to create obscurity for the purpose of profiting by 
it. The effect is precisely the same, as if the scale of taxation 
were raised ]3?'o tanto.* Turgot adopted a contrary course, §ind 

advance upon the prices of France, and have the enjoyment of an unadid- 
teratedj wholesome, and exhilarating beverage, costing perhaps a shilling 
a bottle. But the exorbitant duty upon this article has reduced its im- 
port and the product of the duty to a very trifle ; and thus, the sole benefit 
resulting from the tax to the British nation is, the total privation of a cheap 
and wholesome object of consumption. 

The two last examples are a, sufficient answer to the objection taken by 
Ricardo to this passage of my text ; on the ground, that taxation is not in- 
jurious to production in the aggregate, inasmuch as the consumption of the 
state itself replaces that of individuals, which is annihilated by the tax. A 
tax, that robs the individual, without benefit to the exchequer, substitutes 
no public consumption whatever, in place of the private consumption it ex- 
tinguishes. 

* Of this a striking instance is given in a work entitled, Diverses Idies 
sur la Legislation et V Administration,, par M. C, St. Paul. One of the prin- 
cipal bankers of Paris having died in 18l7, the duty on legacies and inheri- 



414 ON CONSUMPTION. book in. 

made it a rule to lean always to the side of the tax-payer. The 
public contractors made a great outcry at this innovation, declar- 
ing that it was impossible for them to fulfil their engagements, 
and offering to collect on the government account and risk. The 
event, however, falsified their predictions by an actual increase of 
the receipts. The greater lenity in the collection proved so ad- 
vantJigeous to producton, and the consumption, consequent upon 
it, that the profits, which had before not exceeded 10,550,000 
liv., rose to 60,000,000 liv. ; an advance which could hardly be 
credited, if it were not attested by unquestionable evidence.* 

We are told by Humboldt, | to whom we are indebted for a va- 
riety of valuable information, that in thirteen years from 1778, 
during which time Spain adopted a somewhat more liberal system 
of government in regard to her American dependencies, the 
increase of the revenue in Mexico alone amounted to no less a 
sum than 100 millions of dollars ; aad that she drew from that 
country, during the same period, an addition in the single article 
of silver, to amount of 14,500,000 dollars. We may naturally 
suppose, that, in those years of prosperity, there was a corres- 
ponding, and rather greater increase of individual profits; for 
that is the source, whence all public revenue is derived. 

A similar course of conduct has invariably been followed by a 
similar effect ;J and it is a great satisfaction to a writer of hberal 
principles to be able to prove by experience, that moderation is 
the best policy.§ > 

tance was leyied upon the aggregate of his credit-account, and not upon 
the balance after deducting the debits ; and this by virtue of a proviso in 
the revenue laws, which charges the duty upon the gross estate of a. de- 
funct, and not upon the residue after the discharge of the outstanding 
claims. The danger of fraud upon the revenue in stating the account, is 
not sufficient to justify the exaction of more than is fairly due. 

The same department is in the habit of giving no notice to the execu- 
tors or other parties, of the payments falling due, until after the legal time 
has expired, in the hope of their incurring the penalty of default. The 
revolution had abolished this official and fiscal severity ; but it was revived 
by the imperial government, and has been acted upon ever since. A clerk 
or officer has no chance of promotion, unless he shows a disposition on all 
occasions to postpone the interests of the public t,p those of the exchequer. 

* (Euvres de Turgot, torn. i. p. 170. The accounts of the farmers-general 
were minutely stated, and rigidly investigated, because the crown partici- 
pated in their profits. 

+ Essai Pol. sur la Nouvelle Espagne, liv. v. c. 12. 

X This position is further confirmed by an instance mentioned in a letter, 
addressed in 1785, by the then Marquis of Lansdowne to the Ahhe Morellet^ 
stating, ' that in respect to the article of tea, the good effect of the reduc- 
tion of duty had surpassed all expectation. The amount of sale had ad- 
vanced from 5,000,000 lbs. to 12,000,000 lbs., in spite of many unfavourable 
circumstances; besides which, smuggling had been so much crippled, that 
the public revenue had been increased to a degree that astonished every 
body.' 

§ This doctrine has been combated by Ricardo, in his Principles of Poli- 
tical Economy and Taxation. That writer maintains, that since the amount 
and the product of industry is always proportionate to the quantum of the 



CHAP. VIII. ON CONSUMPTION.. 415 

Upon the same principles, it will be easy to demonstrate in the 
next place, that the taxes least mischievous are : 

2. Such as are least attended with those vexatious circum- 
stances, that harass the tax-payer, without bringing anything 
into the public excheqiier. ' 

It has been held by many, that the costs of collection are no 
very great evil, inasmuch as they are refunded to the community 
in some other shape. On this head, I must refer my readers 
to what has been already observed.* These costs are no more 
refunded, than the net proceeds of the taxes themselves ; be- 
cause both the one and the other consists in reality, not of the 
money, wherein the taxes are paid, but of the value, wherewith 
the tax-payer procures that money, and the value which the go- 
vernment again procures with it ; which latter is destroyed and 
consumed outright. 

The necei^sities of princes have operated far more effectually 
than their regard to the public good, to introduce the practice of 
better order and economy in the financial departments of most 
European states during the two last centuries, than in former 
times. The people are generally made to bear as much as they 
can well stand under ; so that every saving in the charge of col- 
lection has gone to swell the receipts of the exchequer. 

Sully tells us in his Memoirs,! that, for 30,000,000 liv. brought 
into the royal treasury, in 1598, by means of taxation, individuals 
were out of pocket 150,000,000 liv.; and assures us, that he had 
with great pains ascertained the fact, however incredible it might 
appear. . Under the administration of Necker, upon a revenue of 
557,500,000, liv. the charges of collection amounted to no more 
than 58,000,000 liv.; yet, , under his management, there were 
250, 060 persons employed in the collection, most of them, how- 
ever, had other collateral occupations. The charge was, there- 
capital engaged in it, the extinction of one braiich by taxation must needs 
be compensated by the product of some other, towards which the industry • 
and capital, thrown out of employ, will naturally be diverted. I answer, 
that whenever taxation diverts capital from one mode of employment .to 
another, it annihilates tlie profits of all who are thrown out of employ by 
the change, and diminishes those of the rest of tl:i,e community ; for industry 
may be presumed to have chosen the most profitable channel. I will go 
further, and say, that a forcible diversion of the current of production an- 
nihilates many additional sources of profit to industry. Besides, it makes 
a vast difference to the public prosperity, whether the individual or the 
state be the consumer. A thriving and lucrative branch of industry pro- 
motes the creation and accumulation of new capital ; whereas, under the 
pressure of taxation, it ceases to be lucrative ; capital diminishes gi'adually 
instead of increasing; wealth and production decline in consequence, and 
prosperity vanishes, leaving behind the pressure of unremitting taxation. 
Ricardo has endeavoured to introduce the unbending maxims of geometri- 
cal demonstration ; in the science of political economy, there is no method 
less worthy of reliance. 

* Chap. V. sect. 1. t Liv. xx. 



416 ON CONSUMPTION. book tir. 

fore, about 10 4-5 per cent.; yet this is much higher than the 
rate at which the business is done in England.* 

Besides the charge of collection, there are other circum- 
stances, that are burthensome to the people without being pro- 
ductive of gain to the public revenue. Lawsuits, imprisonment 
and other preventive measures, entail additional expense, with- 
out* procuring the smallest increase of revenue. And this addi- 
tion is sure to fall on the most necessitous class of tax-payers; 
for the other classes pay without litigation or constraint. Such 
odious means of enforcing the payment of taxes are precisely 
the same, as demanding of a man 12 /r. because he has not 
wherewithal to pay 10 fr.. Rigour is never necessary to en- 
force taxation where it presses lightly on the resources of indi- 
viduals ; but when a state is so unfortunate, as to be obliged to 
impose heavy burthens, of two evils, the process of levy by 
distress is preferable to that of personal constraint. For at 
any rate, by seizing and selling the tax-payer's goods, and there- 
by raising the arrears of his taxes, he is compelled to pay no more 
than is due ; and the whole of what he does pay goes into the 
public purse. 

On this account it is, that works executed by the public requi- 
sition of labour, as the roads were in France under the old regime, 
are always a mischievous kind of taxation.. The time lost by the 
labourers put in requisition incoming three or four leagues, 
perhaps, to their work, and that which is always wasted by peo- 
ple who get no pay, and work against their inclination, is all a 
dead loss to the public^ with no return of revenue. Even sup- 
posing the work to be well executed, there is often more loss 
incurred by the interruption of the regular agricultural pursuits, 
than gain made from the compulsory employment that has been 
substituted. Turgot called upon the surveyors and engineers of 
the respective provinces for an estimate of the average expense, 
one year with another, of keeping up old roads, and constructing 
the usual number of new ones, directing them to make their cal- 
culations on the most liberal scale. The estimate of the annual 
expense, made in compliance with his Orders, amounted to 
10,000,000 liv. for the whole kingdom : whereas, according to. 
the calculations of Turgot, the old corvee system involved a sa- 
crifice to the nation of 40,000-,000 liv.-\ ' 

* Under the system of Nappleon, which made civilization retrograde to 
this, as well as in most other particulars, the charges of collection, in which 
must be included the charge of privation and the irrecoverable arrears, were 
much more considerable; but the full extent of the mischief he caused is 
not yet ascertained. 

t Necker reckons the corvee at 20 millions only ; but probably he takes 
account of nothing, but the value of the day-labour exacted; and does not 
notice the injury resulting from this method of supplying the public neces- 
sities. , •' 



CHAP. viH, ON CONSUMPTION. 417 

Days of rest, enjoined either by law, or by custom and usage 
too powerful to be infringed upon, are another kind of taxation, 
productive of nothing to the public purse. 

3. Such as press impartially on all classes. 

Taxation being a burthen, must needs weigh lightest on each 
individual, when it bears upon all alike. When it presses inequi- 
tably upon one individual or branch of industry, it is an indirect, 
as well as a direct, incuntibrance ; for it prevents the particular 
branch or the individual from competing on even terms with the 
rest. An exemption, granted, to one manufacture, has often been 
the ruin of several others. Favour to one is most commonly injus- 
tice to all others. 

The partial assessment of taxation is no less prejudicial to the 
public revenue, than unjust to individual interests. Those who 
are too lightly taxed, are not likely to cry out for an increase ; 
and those who are too heavily taxed, are seldom regular in their 
payments. The public revenue suffers in both ways. 

It has been questioned whether it be just to tax that portion 
of revenues, which is spent on luxuries, more heavily than that 
spent on objects of necessity. It seems but reasonable to do so; 
for taxation is a sacrifice to the preservation of society and of 
social organization, which ought not to be purchased by the de- 
struction of individuals. Yet, the privation of absolute necessa- 
ries implies the extinction of existence. It would be somewhat 
bold to maintain, that a parent is bound in justice to stint the food 
or clothing of his child, to furnish his contingent to the ostenta- 
tious splendour of a court, or the needless magnificence of public 
edifices. Where is the benefit of social institutions to an indivi- 
dual, whom they rob of an object of positive enjoyment or neces- 
sity in actual possession, and offer nothing in return, but the par- 
ticipation in a remote and contingent good, which any man in 
his senses would reject with disdain ? ' . 

But how is the line to be drawn between necessaries and su- 
perfluities] In this discrimination, there is the greatest difficulty; 
for the terms, necessaries and superfluities, convey no determi- 
nate or absolute notion, but. always have reference to the time, 
the place, the age, and the condition of the party ; so that, were 
it laid down as a general rule, to tax none but superfluities, 
there would be no knowing where to begin, and where to stop. 
AH that we certainly know is, that the income of a person or a fanii- 
ly may be so confined, as barely to suffice for existence ; and may 
be augmented from that niinimum upwards by imperceptible gra- 
dation, till it embrace every gratification of sense, of luxury, or 
of vanity; each successive gratification being one step further 
removed from the limits of strict necessity, till at last the ex- 
treme of frivolity and caprice is arrived at; so that, if it be desir- 
ed to tax individual income, in such manner as to press lighter, 
in proportion as that income approaches to the confines of bare 

61 



418 ON COxXSUMPTION. book hi. 

necessity, taxation must not only be equitably apportioned, but 
must press on revenue with progressive gravity. 

In fact, supposing taxation to be exactly proportionate to indi- 
vidual income, a tax of ten per cent, for instance, a family pos- 
sessed of 300,000 /r. per annum would pay 30,000/7-. in taxes, 
leaving a clear residue of 270,000/r. for the family expendi'ure. 
With such an expenditure, the family could not only live in abun- 
dance, but could still enjoy a vast number of gratifications by no 
means essential to happiness. Whereas another family, with an 
income of 300 Jr., reduced by taxation to 270 fr. per annum, 
•would, with our present habits of life, and ways of thinking, be 
stinted in the bare necessaries of subsistence. Thus, a tax 
merely proportionate to individual income would be far from equi- 
table ; and this is probably what Smith meant, by declaring it 
reasonable, that the rich man should contribute to the public ex- 
penses, not merely in proportion to the amount of his revenue, 
but even somewhat more. For my part, I have no hesitation in 
going further, and saying, that taxation can not be equitable, un- 
less its ratio is progressive.* 

4. Such as are least injurious to reproduction. 

Of the values, whereof taxation deprives individuals, a great 
part would, undoubtedly, if left at the disposal of the individuals 
themselves, have gone to the satisfaction of their wants and ap- 
petites ; but some part would have been laid by, and have gone 
to the further accumulation of productive capital. Thus, all 
taxation may be said to injure reproduction, inasmuch as it pre- 
vents the accumulation of productive capital. 

This effect is more direct and serious, whenever the tax-payfer 
is obliged to withdraw a part of the capital already embarked, for 
the purpose of enabling him to pay the tax ; which case, as Sis- 
mondi has shrewdly observed, resembles the exaction of a tithe 
upon grain at seed-timej instead of harvest-time. Of this kind 
is the tax on legacies and successions. An heir, succeeding to 
a property of 100,000 /r. and called upon for a tax of 5 per cent. 
upon it, will pay it, not out of his ordinary income, burthened as 
it is already with the ordinary taxes, but out of the inheritance, 
which is thereby reduced to 95,000 /r. Wherefore, if it happen 
to be a vested capital of 100,000 /r., and be reduced by the tax 

* Wealth of Nations, book v. c. 2. It has been objeGted," that a progres- 
sive scale of taxation presents the disadvantag-e of operating as a penal- 
ty to deter activity and frugality from the accumulation of capital. But 
it must be obvious, that taxation of all kinds subtracts a portion only, ^nd 
generally a very moderate portion, of the addition made to the fortune of 
an individual; so that every one has a much stronger inducement to invite, 
than penalty to deter, accumulation. If a person had to pay 200 fr. more 
in taxes, upon every addition of 1000 /r. to his revenue, still he "would mul- 
tiply his enjoyments in a larger ratio than his sacrifices. Vide what is said 
in Sect. 4. of the same Chapter, on the subject of the land-tax of England. 
Jbid. 



CHAP. viii. ON CONSUMPTION. 419 

to 95,000 /n, the national capital will be diminished to the amount 
of the 5,000 /r. thus diverted into the public exchequer. 

It is the same with all taxes upon the transfer of property. The 
Owner of land worth 100,000 /r. will get but 95,000/r. for it, if 
the purchaser be saddled with a tax of 5 per cent. The seller 
will have a disposable capital of 95,000 fr. only, in heu of land 
worth 100,000 fr.; arid the national capital will sustain a loss 
of the ditFerence. Should the purchaser be so bad an arithmeti- 
cian, as to pay the full value of the land, without allowing for the 
tax, he will sacrifice a capital of 105,000 fr. in the purchase of 
value to the amount of but 100,000/r. In either case, the loss 
to th^ national capital will be the same; although, in the latter, it 
will fair upon the purchaser instead of the seller. 

Taxes upon, transfer, besides the mischief of pressing upon 
capital, are a clog to the circulation of property. But, has the 
public any interest in its free circulation? So long as the object 
is in existence, is it not as well placed in one hand as in another? 
Certainly not. The public has a perpetual interest in the utmost 
possible freedom of its circulation ; because by that means it is 
most likely to get into the hands of those, that can make the 
most of it. Why does one man sell his land? but because he 
thinks he can lay out the value to more advantage in some chan- 
nel of productive industry. And why does another buy it? but 
because he wishes to invest a capital, that is lying idle or less 
productively vested ; or because he thinks it capable of improve- 
ment. The transfer tends to augment the national income, be- 
cause it tends to augment the income of the two contracting par- 
ties. If they be deterred by the expenses of the transfer, those 
expenses will have prevented this probable increase of the national 
income. 

Such taxes, however, as encroach upon the productive capital 
of the community, and, consequently, abridge the demand for 
labour and the profits of industry within the coqimunity, possess, 
in a very high degree, one quality, which that distinguished poli- 
tical economist, Arthur Young, has pronounced to be an essen- 
tial requisite in taxation ; viz. the facility and cheapness of col- 
lection.* Since taxation presents at best but a choice of evils, 
a nation, heavily burthened, will probably do well, in submitting 
to a moderate impost upon capital. 

Taxes Upon law-process, and, generally all that is paid to law 

* This is thp reason, why it has been found practicable to raise the duty 
on registration to its present high scale. Were it reduced, the product to 
the exchequer would probably be equally great ; and the nation would en- 
joy t^e benefit of greater freedom of circulation, besides experiencing less 
encroachment upon its capital, (ffl) 



(a) The effect on the national capital would be precisely the same ; the 
repeated action of the tax would make up for its lenity. T- 



420 OiN CONSUMPTION. book in. 

officers and agents, are taxes upon capital. (1) For litigation is 
not proportionate to the income of the suitors, but to accident, to 
the complexity of family interests, and to the imperfections of the 
law itself. 

Forfeitures are equally a tax on capital. 

The influence of taxation upon production is not confined to 
the circumstance of diminishing one of its sources, that is to say, 
capital ; it operates besides in the nature of a penalty, inflict- 
ed upon certain branches of production and consumption. Pa- 
tents, licenses to follow any specified calling, and, generally, all 
taxes, that bear directly upon industry, are liable to this objec- 
tion ; but, when moderate in their ratio, industry will contrive to 
surmount such obstacles without much diflnculty. 

Nor is industry aftected only by taxes bearing directly upon it; 
it is indirectly affected by such also, as bear upon the consump- 
tion of the articles it has to work upon.. 

The products consumed in reproduction are, for the most part, 
those of primary necessity; and taxes, that discourage such pro- 
ducts, must be injurious to reproduction. This is more especially 
the case in respect to those raw materials of manufacture, which 
can only be consumed reproductively. An excessive duty upon 
cotton-wool checks the production of all articles, wherein that 
substance is worked up.* 

Brazil is a country abounding in articles, that might be cured 
and exported, if they were allowed to be salted. Its fisheries 
are very productive, and cattle so abundant, that they are killed 

* In both England and France, premiums are given upon the importation 
of specific raw materials, with a view to encourage manufacture. This is 
an error on the opposite side. Upon this principle, instead of a tax on the 
product of land, a bomity should be given to all, who would take the trou- 
ble to cultivate ; for domestic agriculture fui-nishes the raw material of most 
manufactures; as grain in particular, which is transformed, through the me- 
diation of human exertion, into value of various kinds, exceeding that con- 
sumed in the process. Customs or duties of import upoii any article what- 
ever ere equally equitable with direct taxes upon land ; both are positive 
evils; but the lighter the tax, the smaller the injury. 



(1) [Taxes upon law-process are the most grievous and oppressive that 
have ever been resorted to, and since the appearance of Mr. Bentham's work 
on Law taxes, no one, who has read it, can doubt their iuipolioy. It is said 
in the Edinburgh Review, (vol. 27, page 358) " that one day Mr. Rose, in 
Mr. Pitt's presence, took Mr. Bentham aside, and informed him that they 
had read the pamphlet — that its reasoning was unanswerable-r— and that it 
was resolved there should be no more such taxes." " Yet Budget after 
Budget," remarks the reviewer, "has since been formed, in which those 
duties have made a part; and Mr. Pitt himself was found to patronize them 
upon his return to office in 1804," All the arguments ever brought forward 
in support of this objectionable impost, have been triumphantly refuted by 
Mr. Bentham, in this work, which, it is said, in the same Review, "for 
closeness of reasoning, has not perhaps been equalled, and for excellence of 
style, has certainly never been surpassed."] American Editor. 



CHAP. viii. ON CONSUMPTION. 421 

merely for the sake of the hide. Indeed, it is thence that our 
tanneries in Europe are in a great measure supplied. But the 
salt duties prevent the export of either fish or meat; and thus, for 
the sake of a revenue of a million of francs, perhaps incalculable 
mischief is done to the productive powers of the country, as well 
as to the public revenue, which they might be made to yield. 

In like manner, as taxation operates in the nature of a penalty, 
to discourage reproductive consumption, it may be employed to 
check consumption of an unproductive kind ; in which case, it 
has the two-fold advantage, of subtracting no value from repro- 
ductive investment, and of rescuing values from unproductive 
consumption, to be employed in a manner more beneficial to the, 
community. This is the advantage of ail taxes upon luxuries.* 

When sums, levied by taxation upon capital, instead of being 
simply expended by the government, are laid out upon produc- 
tive objects; or, when individuals contrive to make good the de- 
ficiency out of their private savings, the positive mischief of tax- 
ation is then balanced by a counteracting benefit. The proceeds 
of taxation are reproductively vested, when laid out in improving 
the internal communications, constructing harbours, or other 
such works of utility. Governments sometimes employ a part 
of the revenue thus realized in adventures of industry. . Colbert 
did so, when he made advances to the manufacturers of Lyons. 
The governments of Hamburgh, and of some other places in 
Germany, were in the habit of embarking their revenues in pro- 
ductive undertakings; and it is said, that the authorities of Berne 
were in the habit of so employing a part of its revenues every 
year; but such instances are of very rare occurrence. 

5. Such as are rather favourable than otherwise to the nation- 
al morality; that is to say, to the prevalence of habits, useful and 
beneficial to society. 

Taxation influehces the habits of a nation, in the same way as 
it operates upon its production and consumption, viz: by impos- 
ing a pecuniary penalty upon specified acts; and it is, moreover, 
possessed of the grand requisites to render punishment ^fTectual; 
namely, moderation and difficulty of evasion. "j" Without refer- 
ence, therefore, to the purposes of finance and revenue, it is a 
powerful engine in the hands of government, for either corrupt- 
ing or reforming the national morals, and may be directed to the 
promotion of idleness or industry, extravagance or economy. 

The fax of five per cent, upon all lands devoted to productive 

* When it is absolutely necessary to lay a tax on a particular kind of con- 
sumption or industry, which it is desirable not to extinguish altogether, the 
burthen must be light in the commencement, and increased gradually and 
cautiously. But, if it be desired to repress or annihilate a mischievous class 
of consumption or industry, the full weight of the tax should be thrown 
upon it at once. 

t The efficacy of these characteristics of punishment has been placed be- 
yond all doubt by Beccaria, in his tract, Dei delitti e delle pene. 



422 ON CONSUMPTION. book in. 

husbandry, and the exemption of pleasure-grounds, which exist- 
ed in France before the revolution, operated, of course, as a pre- 
mium upon luxury, and a penalty upon agricultural enterprise. 

The tax of one per cent, upon the redemption of ground-rents 
and rent-charges was virtually a penalty upon an act, equally ad- 
vantageous to the parties and to the community at large; a fine 
upon the meritorious exertions of prudent landowners to pay off 
their incumbrances. 

The law of Napoleon, exacting from each scholar, educated 
in a private academy, a specified payment into the. chests of the 
public universities, operated as a penalty upon that mode of edu- 
cation, which alone can soften national manners and fully deve- 
lop the faculties of the human mind.* 

When a government derives a profit from the licensing of lotte- 
ries and gambling-houses, what does it else but offer a premium 
to a vice most fatal to domestic happiness, and destructive of na- 
tional prosperity 1 How disgraceful , is it, to see a government 
thus acting as the pander of irregular desires, and imitating the 
fraudulent conduct it punishes in others, by holding out to want 
and avarice the bait of hollow and deceitful chance ["j" 

* This species of tax is still more 'iniquitous, because it must fall either 
upon orphans, or upon parents, who are disposed to submit to personal pri- 
vations, for the purpose of rearing valuable citizens; because it is-heavier 
in proportion to the number of children, and the degree of privation of the 
parent ; and because it is disproportionate to the means of the individual, 
poor and rich being' taxed alike. A parent of moderate fortune, with one 
son only, pays as much t9 the university as all the rest of his taxes together : 
if he have more sons than one, he is still worse off. Thus was this institu- 
tion converted by the usurper into an instrument of fiscal extortion, suffi- 
cient of itself to have insured the relapse into barbarism, even had it never 
been made the medium of instilling false ideas or habits, of servility. The 
pretext, of making the profits of private establishments contribute to the 
expense of compulsory tuition, is by no means satisfactory. Supposing the 
tuition of the public Lycees to be, of all others, the best calculated to train 
up useful citizens; and, admitting the justice of compelling a father, or a 
teacher to his choice, to bring his pupil to the lectures of the authorized 
professors, still the parties, least in need of this instruction, are those al- 
ready placed in private establishments of education, and entrusted to teach- 
ers of their own selection. It may be for the interest of the community at 
large, to dispense particular classes of learning gratuitously; but it is the 
grossest oppression to force learning upon individuals, and make them pay 
dear for it into the bargain. If any one class in particular ought to defray 
the charge of moderate gratuitous tuition, it is that, which has no children 
of its own, and is in the perception of all the benefits of social life, without 
being subject to all its burthens. . 

t Lotteries and games of hazard, besides occupying capitd unprofitably, 
involve the waste of a vast deal of time, that might be turned to useful ac- 
count; and this item of expenditure can never redound to the profit of the 
exchequer. They have the further mischievous effect of accustoming man- 
kind to look to chance alone for what their own talents or enterprize might 
attain ; and to seek for personal gain, rather in the loss of others, than in 
the original sources of wealth. The reward of active energy appears paltry 
beside the bait of a capital prize. Moreover, lotteries are a sort of tax, that, 
however voluntarily incurred, falls almost wholly upon the necessitous ; for 



CHAP. vni. ON CONSUMPTION. 423 

On the contrary, taxes, that check and confine the excesses of 
vanity and vice, besides yielding a revenue to the state, operate 
as a means of prevention. Humboldt mentions a tax upon cock- 
fighting, which yields to the Mexican government 45,000 dollars 
per annum, and has. the further advantage of checking that cruel 
and barbarous diversion. . 

' Exorbitant or inequitable taxation promotes fraud, falsehood, 
and perjury. Well-meaning persons are presented with the dis- 
tressing alternative, of violating truth, on sacrificing their inte- 
rests in favour of less scrupulous fellow^citizens. They can not 
but feel involuntary disgust, at seeing acts, in themselves inno- 
cent, and sometimes even useful and meritorious, branded with 
the name, and subjected to all the consequences, of criminality. 

These are the principal rules, by which present or future taxr 
ation must be weighed, with a view to the public prosperity. Af- 
ter these general remarks, which are applicable to taxation in all 
its branches, it may be useful to examine the various modes of 
assessment; in other words, the methods adopted for procuring 
money from the subject; as well as to inquire, upon what classes 
of the community the burthen principally falls. 



SECTION II. 

Of the different JWodes of Assessment, and the Classes they press 
upon respectively. 

Taxation, as we have seen above, is a requisition by the go- 
vernmeift upon its subjects for a portion of their products, or of 
their value. It is the business of the political economist to ex- 
plain the effects resulting from the nature of the products put in 
requisition, and from the mode of apportioning the burthen, as 
well as upon whom the burthen of the charge really falls, since 
it must inevitably fall upon some' one or other. The application 
of the above principles in a few specific instances wil-1 show, how 
they may be applied in all others. 

The public authority levies the values taken in the way of 
taxation, sometimes in the shape of money, sometimes in kind, 
according to its own wants, or the ability of the tax-payer. In 
whatever shape it is paid, the actual contribution of the tax-payer 
is always of the value of the article he gives. If the government, 
wanting or pretending to want corn, or leather, or woollens, 
makes a requisition of those articles upon the tax-payer, and 
obliges him to furnish them in kind, the tax paid amounts ex- 
nothing, but the pressure of want can drive mankind to adventure, with the 
chances nlanifestly against them. The sums thus embarked are for the 
most part, the portion of misery; or, what is worse, the fruit of actual 
crime. 



424 ON" CONSUMPTION. book hi. 

actly to what the payer has expended in procuring those arti- 
cles, or what he could have sold them for, if the government had 
not taken them from him. This is the only way of ascertaining 
the amount of the tax, whatever price or rate the government 
may set upon it in the plenitude of its power. 

•So, likewise, the charges of collection, in whatever shape they 
may appear, are always an aggravation of the assessment, whe- 
ther they accrue to the profit of the state or not. — If the tax- 
payer be obliged to lose his time, or transport his goods, for the 
purpose of paying the tax, the whole of the time lost, or expense 
of transport, is an aggravation of the tax. 

Among the contributions, that a government exacts from its 
subjects, should likewise be comprised, all the expenses which 
its political conduct may bring upon the nation. Thus, in esti- 
mating the expenses of war, we must include the value of equip- 
ment and pocket-money, with which the military are supplied by 
themselves or their families ; the value of the time lost by the 
militia ; the sums paid for exemption and substitutes ; the full 
charge of quarters for the troops; the pillage and destruction 
they may be guilty of; the presents and attentions lavished on 
them by friends or countrymen on their return: to all which 
must be added, the alms extorted from pity and compassion by 
the misery consequent upon such misrule. For, in fact, none 
of these values need have been taken from the" members of 
the community under a better system of government. And, al- 
though none of them have gone into the treasury of the monarch, 
yet have they been paid by the people, and their amount is as 
completely lost, as if they had contributed to the happiness of 
the human species. • 

Hence, we may form some notion of the extent of the national 
sacrifices. But, from what source are they drawn? — Doubtless, 
either from the annual product of the national industry, land, and 
capital; that is to say, fiom the national revenue; or from the 
values previously saved and accumulated; that is to say, from 
the national capital. 

When taxation is moderate, the. subject can not only pay his 
taxes wholly out of his revenue, but will not be altogether disa- 
bled from besides saving some part of that revenue: and, al- 
though some of the tax-payers maybe obliged to trench upon 
their capital for the payment of their taxes, the loss to the gene- 
ral stock is amply reimbursed by the savings, which this happy 
state of affairs allows others to effect. 

But it is far otherwise, when military despotism or usurped au- 
thority extorts excessive contributions. Great part of the taxes 
is then taken from the vested and accumulated capital; and, if 
the country be long subjected to its domination, the revenues of 
each successive year are progressively reduced, and the ruin and 



CHAP. vni. ON CONSUMPTION. 425 

depopulation of the country will recoil upon its rulers, unless 
their -downfcil be accelerated by their own folly and excesses. 

Under the protecting influence of just and regular government, 
on the contrary, there is a progressive annual enlargement of the 
profits and revenues, on which taxation is to be levied; and that 
taxation, without any alteraltion of its ratio, gradually becomes 
more productive by the mere multiplication of taxable products. 

Nor is the government more deeply interested in moderating 
the ratio of taxation, than in its impartial assessment upon every 
class of individual revenue, and its equal pressure upon all. In 
fact, when revenue is partially affected, taxation sooner reaches 
theextreme limits of the ability of some classes, while others are 
scarcely touched at all : it b.ecoraes vexatious and <lestructive, 
before it arrives at the highest practicable ratio. The burthen 
is galling,, not because of its weight, but because it does not rest 
upon all shoulders alike. 

The different methods employed to reach individual revenues, 
may be classed under two grand divisions — direct, and indirect, 
taxation ; the former is, the absolute demand of a specific por- 
tion of an individual's real or supposed revenue ; the latter, a 
demand of a specific sum on each act of consumption of certain 
specified objects, to which that income may be applied. 

In neither case, is the real subject of taxation that commodity, 
on which the estimate is made, and which forms, the ground- 
work of the demand for the tax; or of necessity that value; 
wherebf a part is taken by the state ; individual revenue is the 
only real subject of taxation ; and the specific commodity is 
selected only as a more or less effective means of discovering 
and attacking, that revenue. If individual honesty could in every 
case be rehed on, the matter would be simple enough; all that 
would be requisite would be, to ask each person the amouptof 
his annual profits, that is to say,- his annual revenue. The con- 
tingent of each would be readily settled, and one tax only neces- 
sary, which would be at the same time the most equitable, and 
the cheapest in the collection.. This was the method adopted at 
Hamburgh, before that city fell into misfortune ; but it can never 
be practised, except in a republic of smajl extent, and very mo- 
derately taxed. 

As a means of assessing direct taxatioij proportionately to the 
respective revenues of the tax-payei'a, governments sometimes 
compel the production of leases by landlords, or, where there is 
no lease set a value on the land, and demand a certain propor- 
tion of that value from the proprietor ; this is called a land-tax.* 
Sometimes they estiinate the revenue by the rent of the habita- 
tion, and the number of servants,^ horses and carriages kept, and 
make the assessment accordingly. This is called in France, the 
lax on mo,veables.| Sometimes they calculate the profits of 

* Contribution-fonciere — t v^obiliere. 
62 



426 ON CONSUMPTION. book hi. 

each person's profession or calling, by the extent of the popula- 
tion and district where it is followed. This is called in France, 
the license-tax.* All these different modes of assessment are 
expedients of direct taxation. 

In the assessment of indirect taxation, and such as is intended 
to bear upon specific classes of consumption, the object it^5elf is 
alone attended to, without regard to the party who may incur the 
charge. Sometimes a portion of the value of the specific pro- 
duct is demanded at the time of production ; as in France, in the 
article of salt. Sometimes the demand is made on entry, either 
into the state, as in the duties of import ;'\ or into the towns only, 
as in the duties of entry. J — Sometimes a lax is demanded of the 
consumer at the moment of transfer to him from the last pro- 
ducer ; as in the case of the stamp duty in England, («) and the 
duty on theatrical tickets in France. Sometimes the government 
requires a commodity to bear a particular mark, for which it 
makes a charge, as in the case of the assay-mark of silver, and 
stamp on newspapers. Sometimes it monopolizes the manufac- 
ture of a particular article, or the performance of a particular kind 
of business ; as in the monopoly of tobacco, and the postage of 
letters. Sometimes, instead of charging the commodity itself, it 
charges the payment of its price; as in the case of stamps on re- 
ceipts and mercantile paper, xill these are different ways of 
raising a revenue by indirect taxation ; for the demand is not 
made on any person in particular, but attaches upon the product 
or article taxed. § 

It may easily be conceived, that a class of revenue, which may 
escape one of these taxes, will be affected by another; and that 
the multiplicity of the forms of taxation gives a great approxima- 
tion to its equal distribution ; provided always, that all are kept 
within the bounds of moderation. 

Every one of these modes of assessment has peculiar advan- 
tages and peculiar disadvantages, besides the generalevil of all 
taxation, viz. that of appropriating a part of the products of the 
community to purposes little conducive to its happiness and re- 
productive powers. Direct taxation, for instance, is cheap in the 
collection; but, on the other hand, it is paid with reluctance, and 
must be enforced with considerable harshness and rigour. Be- 
sides, it bears very inequitably upon the individual. A rich mer- 
chant, charged only 600/r. for his license, makes an annual pro- 

* Les Patentes. ' t Douanes. t Octroi. 

§ Not because they affect the tax-payer indirectly; for this circumstance 
is equally applicable to many items of direct taxation ; as, for instance, to 
the license-tax (patentes), part of which tails indirectly upon the consumer, 
who buys of the licensed dealer. 



(a) It is difficult to say, what branch of the English stamp-duties is here 
alluded to. T. 



CHAP. VIII. ON CONSUMPTION, 427 

fit, perhapSj of 100,000 /r. ; while the retailer, who can scarcely 
be supposed to make more than 4000 /r., is charged for his li- 
cense 100 /r., which is the lowest rate. The revenue of the 
landholder is already affected by the land-tax, before it is further 
reduced by the tax on moveables; while the capitalist is subject- 
ed to the latter burthen only. 

Indirect taxation has the recommendation of being levyable 
with more ease, and with less apparent vexation or hardship. All 
taxes are paid with reluctance, because the. equivalent to be ex- 
pected for them, i. e. the security afforded by good order and 
government, is a negative benefit, which does not immediately in- 
terest individuals;^ for tiie benefit afforded consists rather in pre- 
vention of ill, than in the diffusion of good. But the buyer of 
the taxed commodity does not suspect himself to be paying for 
the protection of government, which probably he cares very little 
about; but merely for the commodity itself, which is an object of 
his urgent desire, although, in fact, that price is aggravated by 
the tax. The inducement to consume is strong enough to include 
the demand of the government; and he readily parts with a value, 
that procures an immediate gratification. 

It is this circumstance, that makes such taxes appear to be 
voluntary. And, indeed, so much so were they considered by the 
United States before their emancipation, that, although the right 
of the British Parliament to tax America without her consent 
was stoutly denied, yet she was ready to acknowledge the right 
of imposing taxes upon consumption, which every body could 
evade if he pleased, by abstaining from the articles taxed.* Per- 
sonal taxes are viewed ia a different light, and have more of the 
character of ostensible spoliation. 

Indirect taxation is levied piecemeal, and paid by individuals 
according to their respective ability at the moment. It involves 
none of the perplexity of separate assessments on each province, 
department, or individual ; or of the inquisitorial inspection into 
private circumstances; nor does it make one person suffer for the 
default of another. The inconvenience of appeals and private 
animosities, as well as of levy by distress or imprisonment, is 
avoided altogether. 

Another advantage of indirect taxation is, that it enables the 

* Vide Examination of B. Franklin, at the bar of the House of Com- 
mons, 1766. Memoirs, vol. i. Appendix 6. (a) 



(fl) The denial went to the whole of what is called internal taxation; the 
•admission, which appears on the part of the American agents to have been 
a concession for the sake of peace, went no farther than to external taxes 
for the regulation of trade. And even this concession on the part of some 
of the agents was very soon retracted, an^ the right of taxation denied in 
toto. lM.d. vol. i. passim. T. 



428 ON CONSUMPTION. book hi 

government to bias the ditTerent classes of consumption ; favour- 
ing such as promote the public prosperity, as does reproductive 
consumption of all kinds ; and checking such as tend to public 
impoverishment, as do all kinds of unproductive consumption ; 
discouraging the costly and insipid indulgences of the wealthy, 
and promoting the simpler and cheaper enjoyments of the poor 
and industrious. 

It has been objected to indirect taxation, that it entails a heavy 
expense of collection and management, and a large establishment 
of clerks, officers, directors, and subordinate agents; but it is ob- 
servable, that these charges may be vastly reduced by good ad- 
ministration. The excise and stamp-duties in England cost but 
3i per cent, in the collection in the year 1799.* There are few 
classes of direct taxation, that are managed so econom.ically in 
France. 

It has been further objected, that its product is uncertain and 
fluctuating ; whereas, the public exigencies require a regular and 
certain supply : but there has never been any lack of bidders, 
whenever such taxes have been let out to farm ; jand experience 
has shown, that the product of every class of taxation may al- 
ways be nearly estimated and sately reckoned upon, except in 
very rare and extraordinary emergencies. Besides, taxes on 
consumption are necessarily various ; so that,- the deficit of one 
is covered by the surplus of another. 

Indirect taxation is, however, an incentive to fraud, and obliges 
governments to brand with the character of guilt, actions that are 
innocent in their nature ; and, consequently, to resort to a dis- 
tressing severity of punishment. But this mischief 4s never con- 
siderable, until taxation has grown excessive, so as to make the 
temptation to fraud counterbalance the danger incurred. All ex- 
cess of taxation is attended with this evil; that, without enlarging 
the receipts of the public purse, it multipUes the sufferings of the 
population. 

It may be observed, that consumption, and, consequently, in- 
dividual revenue, are unequally affected by indirect, as well as by 
direct, taxation : for the private consumption of many articles is 
not proportionate to the revenue of the consumer. The possess- 
or of an annual revenue of 100,000 /r. does not consume in the 
year an hundred times as much salt, as the possessor of a 
revenue of 1000 /r. only. But this inequality vmay be ob- 
viated by the variety of taxes on consumption. Moreover, it is 
to be recollected, that such taxes fall upon incomes already 
charged with the taxes on land and on moveables. A person, 
whose whole income is derived from land, in respect to which he 
is taxed in the first instance, pays on the same income a second 

* Gamier, Traduction de Smith, torn. iv. p. 438. According to Arthur 
Young, the stamp-duties in his time cost but 5,691/. in the collection, upon 
a receipt of 1,330,001)/.; which is less than ^ per cent. ; 



CHAP. VIII. ON CONSUMPTION. 4W 

tax under the head of moveables ; and a third on every taxed ar- 
ticle, that he buys and consumes. 

Although all these kinds of taxes be paid in the outset, by the 
persons of whom they are demanded by the public authority, it 
would be wrong to suppose, that they always ultimately fall on 
the original payers, who, in many instances, are not the parties 
really charged, but merely advance the tax in the first instance, 
and contrive to get indemnified wholly or partially by the con- 
sumers of their own peculiar products. But the rate of indem- 
nity is infinitely diversified by the respective circumstances of 
the individuals. 

Of this diversity, we may form some notion, by the considera- 
tion of the following general facts : 

When the taxation of the producers of a specific commodity 
operates to raise its price, part of ths tax is paid by the consum- 
ers of the commodity. If its price be nowise raised, it falls wholly 
upon the producers. If the commodity, instead of being thereby 
advanced in price, is deteriorated in quality, a portion of the tax 
at least must fall upon the consumer ; for a purchase of inferior 
quality at equal price is equivalent to a purchase of equal quality 
and superior price. - • 

Every addition to price must needs reduce the'nurnber of those 
possessed of the ability to purchase ; or, at any rate, must dimi- 
nish the extent of that ability.* There is much less salt consura-' 
ed, when it sells for 3s. than when it sells for Is. the lb. Now, 
the ratio of the demand to the means of production being lower- 
ed, productive agency in this department is worse paid ; that is 
to say, the master-manufacturer of salt, and all the subordinate 
agents and labourers, together with the capitalists, that supplies 
the funds, and the landlord of the premises where the concern is 
carried on, must be content with smaller profits, because their 
product is less in demand. f The productive classes, indeed, 
naturally strive to indemnify themselves to the amount of the tax; 
but, they can never succeed to the full extent, because the intrin- . 

* Supra, Book II. chap. 1. - 

f The position, that the interest of the capitalist and the rent of the land- 
lord are thereby lowered, however paradoxicar it may appear, is, neverthe 
less, quite true. It may be asked, why should the. capitalist, who makes 
the advance to the manufacturer, or the landlord, whose land he occupies, 
lower their demands, in consequence of a portion of the product being- sub- 
tracted by taxation? But is no allowance to be made for consequent delay 
of payment^ claims of allowances, failures, and .legal expenses ? All, or at 
least a portion, of which must fall upon the landlord and capitalist: and 
often without any suspicion on their part, that .they are thus made to par- 
ticipate in the burthen. In a complex social organization, the pressure of 
taxation is often imperceptible. ' 

This shows the danger of adherence to invariable principle ; and of aban- 
doning the experimental method of Smith, and constructing a system of 
theoretical deduction, as some recent English writers have done, in imita- 
tion of the economists of the last century. - 



430 ON CONSUMPTION. book hi, 

sic value of the commodity, that, I mean, which goes to pay the 
charges of production, is really diminished. So that, in fact, the 
tax upon an article never raises its total price by- the full amount 
of the tax ; because, to do so, the total demand must remain the 
same ; which it never can do. Wherefore, in such cases, the tax 
falls, partly upon those, who still continue to consume, notwith- 
standing the increase of price, and partly upon the producers, 
who raise a less product, and find that, in consequence of the re- 
duced demand, they really obtain less on the sale, when the tax 
comes to be deducted. The public revenue gains the whole ex:- 
cess of price to the consumer, and the whole of the profit, 
which the produce is thus compelled to resign. The effect is ana- 
logous to that of gunpowder, which at the same time propels the 
bullet, and makes the piece recoil. 

By laving a tax upon the consumption of woollens, their con- 
sumption is reduced, and the revenue of the wool-grower suffers 
in consequence. It is true, he may take to a different kind of 
cultivation ; but we may fairly suppose, that, under all the cir- 
cumstances of soil and situation, the rearing of sheep was the 
most profitable kind of culture ; otherwise, he would not have 
chosen it. A change in the mode of cultivation mustV therefore, 
involve a loss of revenue. But the clothier and' the capitalist will 
each be subjected to a portion of the loss resulting from the tax. 

Each concurrent producer is affected by a tax on an article of 
consumption, in proportion only to the share he may have in rais- 
ing the product taxed. 

When the owner of the soil furnishes the greatest part of the 
value of a product, as he does in respect to products consumed 
nearly in. the primary state, he it is that bears the greatest part of 
that portion of the tax, which falls on 'the producers. A duty of 
entry upon the wine imported into the towns, falls heavily upon 
the wine-grower ; but an exorbitant excise upon lace will affect 
the flax-grower in a degree hardly perceptible ; whereas, all the 
other producers, the dealers, the operative and speculative manu- 
facturers, who create the far greater proportion of the value of 
the lace, will suffer very severely. 

When the value of a product is partly of foreign, and partly of 
domestic creation, the domestic producers bear nearly the whole 
burthen of the tax. A tax upon cottons in France will reduce the 
earnings of her cotton manufacturers, by lowering the demand 
for their product; thus, part of the tax will fall on them. But 
the wages of the productive agency of the cotton-growers in Ame- 
rica will be very little affected indeed, unless there be a concur- 
rence of other circumstances. In fact, the tax would reduce the 
consumption in France 10 per cent, perhaps, and the demand in 
America 1 per cent, only, if the demand from France were but 
one-tenth of the general demand upon America. 

The taxation of an object of consumption, if it be one of pri- 



CHAP. VHi. ON CONSUMPTION. 431 

mary necessity, operates upon the price of almost all other pro- 
ducts, and consequently falls upon the revenues of all the other 
consumers. An oc/ro«. upon meat, corn, and fuel, at their entry 
into a town, enhances the price of every thing manufactured in 
it; while a tax upon the tobacco there consumed makes no other 
commodity dearer, the producers and consumers of tobacco alone 
are affected ; and for a very plain reason ; the producer who in- 
dulges in superfluities has to maintain a competition with another, 
who abstains from them ; but, if he pays a tax upon necessaries, 
he need fear no competition: for his neighbours will be all in the 
same predicament. 

The direct taxation of the productive classes must, a fortiori, 
affect the consumers of their products, but can never raise the 
prices of those products so much, as completely to indemnify 
the producer; because as I have repeatedly explained, the in- 
creased price abridges the demand, and the contraction of the 
demand reduces the profits of all the productive agency, that 
has been exerted in the supply. 

Of the concurrent producers of a specific product, some can 
more easily evade the effect of the tax than others. The capi- 
talist, whose capital is not absolutely vested and sunk in a par- 
ticular business, may withdraw it and transfer it elsewhere, from 
a concern that yields him a reduced interest, or has become more 
hazardous. The adventurer or master-manufacturer may, in ma- 
ny cases, liquidate his account, and transfer his labour and intelli- 
gence to some other quarter. Not so the land-owner and pro- 
prietor o.f fixed capital.* An acre of vineyard or cornland will 
only produce a given quantity of corn or wine, whatever be the 
ratio of taxation; which may take the ^ or even 4 of the net pro- 
duce, or rent as it is called, and yet the land be tilled for the sake 
of the remaining i, or \.'\ The rent, that is to say, the portion' 
assigned to the proprietor, will be reduced, and that is all. The 
reason will be manifest to any one, who cpnsiders, that in the 
case supposed, the land continues to raise and supply the market 
with the same amount of produce as before ; while on the other 
hand, the motives in which the demand originates remain just as 
they were. J If, then, the intensity of supply, and demand must 

* Vide Supra, Book I. chap. 4. for the explanation of the mode, in which 
the land-holder concurs in production by the advance of his land; and must, 
therefore, be included amongst the productive classes. 

t The cultivation need never be abandoned altogether, until taxation 
takes more than the whole surplus product, applicable to the payment of 
rent ; it Js then worth nobody's while t6 cultivate at all ; for not only could 
the proprietor receive nothing, the whole being appropriated by the state ; 
but the farmer would ^d compelled to pay to the state a higher rent, than 
he could afford. 

t There is this peculiarity attending the products of agricultural industry; 
viz. that their average price is not raised by growing scarcity, because popu- 
lation is sure to decline co-extensively with the declining supply of human 
aliment ; so that the demand necessarily diminishes equally with the supply. 



432 ON CONSUMPTION. book hi, 

both remain the same, in spite of any increase or diminution of 
the ratio of the direct taxation upon the land, the price of the pro- 
duct suppHed will likewise remain unchanged ; and nothing but 
a change of price can saddle the consumer with any portion what- 
ever of that taxation.* . ' 

Nor can the proprietor evade the tax even by the sale of the 
estate ; for the price or purchase money will be calculated ac^ 
cording to the revenue which may be left him by taxation. The 
purchaser makes his estimate according to the net revenue, 
charges and taxes deducted. If the ordinary interest on such in- 
vestments of capital be five per cent., an estate, that before would 
have sold for 100,000/i-., will fetch but 80,000/r. when it comes 
to be charged with an annual tax of 1000 /r. ; for its actual pro- 
duct to the, proprietor will not exceed 4000 /r. The effect is 
precisely the same, as if government were to appropriate to itself 
1-5 of the land in the country ; which would make no difference 
at all to the consumers of its produce."}" 

But property in dwelling-houses is otherwise circumstanced ; 
a tax upon the ownership raises the rents; for a house, or ra- 
ther the satisfaction it yields to the occupier, is a product of 
manufacture and not of land; and the high rate of house-rent 
reduces the production and consumption of houses, in thfe like 
manner as of cloth or any other manufactured commodity. Build- 
ers, finding their profits reduced, will build less ; and consumers, 
finding the accommodation dearer, will content themselves with 
inferior lodging. - 

From all those circumstances, we may judge ef the .temerity 
of asserting as a general maxim, that taxation falls exclusively 
upon any specific class or classes of the community. It always 
falls upon those who can find no means of evasion ; for every 

Thus,, it is not foundi that wheat is dearer in those countries, wliere great 
part of thelq,nd is throvyn out of tillage, than where it is all in a high state 
of cultivation. In Spain,*wheat is not now dearei-, than in the time of Fer- 
dinand and Isahella, though it is there produced in mUch less abundance ; 
for the number of mouths to be fed is also much less. On the contrary, the 
lands of both England and France were less, cultivated in the middle ages 
than at tlie present day ; and their jiroduot of grain less abundant ; yet it 
does not appear, from a comparison of other values, that it was then much 
dearer than at present. The product and the population were both great- 
ly inferior j and the slackness of demand counterbalanced the slackness of 
supply._ - _ ■ . . ' , ■ ■ . • . 

* It is a mistake to suppose, that the tax must ' bear ekjually upon the 
proprietor and the farmer, who finds the requisite capital and industry ; for 
taxation can have no effect, either in reducing the quantity of land capable 
of cultivation, or in rhultiplyiiig the , number of farmers, able and willing to 
undertake it; and, if neither ;Supply and demand in this branch be varied, 
the ratio of the rent must needs remain unaltered likewise. 

t The Economists were quite correct in their position, that a land or ter- 
titorial tax falls wholly upon the net product, and, consequently, upon the 
proprietors; but they were wrong in extending the doctrine so far as to 
assert, that all other taxes were defrayed out of the same fund. 



CHAP. VIII. ON CONSUMPTION. 433 

one naturally tries to shift the burthen off his own shoulders if 
possible ; but the ability to evade it is infinitely varied, according 
to the various forms of assessment, and the position of each in- 
dividual in the social system. Nay more ; it varies at different 
times even in the same channel of production. When a commo- 
dity is in great request, the holder will not part with the posses- 
sion, unless indemnified for all his advances, of which the tax he 
has paid is a part : he will take nothing short of a full and com- 
plete indemnity. But, if any unlooked for occurrence should 
happen to lower the demand for his product, he will be glad 
enough to take the tax upon himself, for the sake of quickening 
the sale. There are few things so unsteady and variable,. as the 
ratio of the pressure of taxation upon each respective class of the 
community. Those writers, who have maintained, that it bears 
upon any one or more classes in particular, or in any fixed or 
certain proportion, have found their theory contradicted by expe- 
rience at every turn. 

Furthermore, the effects I have been describing, and which 
are equally consonant to experience and to reason, are uniform 
in their operation and of equal duration with the causes in which 
they originate. The owner of land will never be able to saddle 
the consumers of its produce with any part of his land-tax; not so 
the manufacturer. A manufactured commodity will invariably 
feel a diminution in its consumption, in consequence of the price 
being raised by taxation, supposing other circumstances to be 
stationary; and its prfxJuction will be a less profitable occupa- 
tion. A person, who is neither producer nor consumer of an ob- 
ject of luxury, will never bear any portion whatever of the tax 
that may be iaid upon it. — What, then, must we think of a pro- 
position, unfortunately. sanctioned by the approbation of an illus- 
trious body,* that has too much neglected this branch of science, 
viz.' " that it is of little importance whether a tax press upon one 
branch of revenue or another, provided it be of long standing ; 
because every tax in the end affects every class of revenue, in 
like manner, as bleeding in the arm reduces the circulating blood 
of the whole human frame." The object of comparison has no 
analogy whatever with taxation. Social wealth is not a fluid, 
tending constantly to find a level. It rather resembles the vege- 
table creation, which admits of the loss of a hmb without the de- 
struction of the trunk, and in which the loss is more to be la- 
mented, if the branch be productive, than if it be barren. — But 
the tree will bear cutting and hacking in every part, before it be- 
comes barren all over, or necessarily falls into decay. This is a 
far more apposite case; but neither will do to reason upon. 
Comparisons are not proofs, but mere illustrations, tending to 

* The French Institute, which awarded the prize of merit to an Essay of 
M. Canard, in support of this doctrine. 

63 . 



434 ON CONSUMPTION. book hi. 

make that intelligible, which can be made out in proof without 
their assistance. 

When speaking of taxes upon products, which I have some- 
times called taxes upon consumption, although not paid entirely 
in all cases by the consumer, I have hitherto made no mention 
of the particular stage of production, at which the tax may be 
demanded, or of the consequence of this particular circumstance, 
which deserves a little of our attention. 

Products increase in value progressively, as they pass through 
the hands of the different concurrent producers : and even .the 
most simple undergo a variety of modifications, before they arrive 
at a fit state for consumption. Wherefore, a tax does not take 
the proportion of the value of a product which it professes, unless 
it be levied at the precise moment, when it has arrived at the full 
value, and has undergone all the productive modifications. If a 
tax be imposed on the raw material in the outset, proportioned, 
not to its then vahie, but to the value it is about to receive, the 
producer, in whose hands it happens to be, is obliged to advance 
a tax out of proportion to the value in hand; which advance, be- 
sides being highly inconvenient to himself, is refunded with equal 
inconvenience by every successive producer, till it reach the 
hands of the last, who is in turn but partially indemnified by the 
consumer. And there is this further mischief in such an ad- 
vance of the tax ; that it prevents the class of industry, which is 
called upon to make it, from being originally set in motion, with- 
out a larger capital than the nature of the- business requires ; and, 
that the additional interest of the capital, which must be paid, 
part by the consumers, and part by the producers, is so much 
additional taxation, without any addition of public revenue.* 

Thus, both theory and experience lead to the conclusion pre- 
cisely opposite to that drawn by the sect of economists' and 
show that portion of the tax, which presses upon the consumer's 
revenue, to be always the more burthensome, the earlier it is 
levied in the process of production. 

Direct and personal taxes, which operate to raise the price of 

* The duty on the import of cotton-wool into France was, in 1812, as 
high as 1000/r. per bale, one bale with another. There were several manu- 
factories averaging a consumptionof two bales |*er day: and, as the amount 
of duty was a dead outlay, during the whole interval between the purchase 
of the raw material and the realization of the manufactured product, which 
may be taken at twelve months, they must each have required an addition- 
al capital of 600,000 /r. more than would have been requisite but for tax; 
the- interest of which they must have charged to the consumer, or have 
paid out of their own profits. The whole of it was so much addition of 
price to the French consumer, and aggravation of the pressure of taxation, 
unproductive of a single additional /ranc to the public revenue. The hea- 
viest of the national burthens of that period were those, that made the 
least figure in the annual budget of the ministry : the people suffered, in 
very many instances, withotit knowing the nature of the grievance, as in 
the example just cited. 



CHAP. vin. ON CONSUMPTION. 435 

necessaries, or such as fall immediately upon necessaries, are lia- 
ble to this inconvenience in the highest degree: for they oblige 
each producer to advance the personal tax on all the producers 
that have preceded him : so that the same amount of capital will 
set in motion a smaller amount of industry; and the tax-payers 
pay the tax, plus a compound interest upon it, yielding no benefit 
to the exchequer. 

Nor is this mere theory: the neglect of these principles has 
occasioned many serious practical errors; like that of the Con- 
stituent Assembly of France, which carried to excess the system 
of direct taxation, especially upon land; being misled by the 
prevailing and fashionable doctrine of the economists ; — that land 
is the source of all wealth, the agriculturist the only productive 
labourer, and France naturally and essentially an agricultural 
country. ■ 

It seems. to me that, in the present stage of political economy, 
the principles of taxation will be more correctly laid down as fol- 
lows: — 

Taxation is the taking a portion of the general product of the 
community, which never returns to the community in the chan- 
nel of consumption. 

It takes from the community over and above the values actu- 
ally brought into the exchequer, the charges of collection, and 
the personal trouble it entails; together with all those values, of 
which it obstructs the creation. 

The privation resulting from taxation, whether voluntary or 
compulsory, affects the tax-payer in his quality of producer, 
whenever it operates to curtail his profits ; that is to say, his in- 
come or revenue; and affects him in his character of consumer, 
whenever it increases his expenditure, by raising the prices of 
products. 

And, since an increase of expenditure is precisely the same 
thing as a diminution of revenue, whatever is taken by taxation 
may be said to be so much deducted from the revenues of the 
community. 

In a great majority of cases, the tax-payer is affected by taxa- 
tion in both his characters, of producer and 'consumer ; and, when 
he can not manage to pay the public burthens out of his revenue, 
along with his personal consumption, he must encroach upon his 
capital. When this encroachment of one person is not counter- 
balanced by the savings of another, the wealth of the community 
must gradually decline. 

The individual actually paying the tax to the tax-gatherer is 
not always the party really charged with it, at least, not the party 
charged with the whole that is paid. He frequently does no 
more than advance the tax, either wholly or partially ; being af- 
terwards reimbursed by the other classes of the community, in a 
very complicated way, and perhaps after a vast variety of inter- 



436 ON CONSUMPTION. book in. 

mediate operations ; so that a great many persons are paying 
portions of the tax, at a time when probably they least suspect it, 
either in the shape of the advanced price of commodilies, or of 
personal loss, which they feel, but can not account for. 

The individuals, on whose revenues the tax ultimately falls, 
are the real tax-payers, and contribute value greatly exceeding 
the sum that is brought into the exchequer, even with the addi- 
tion of the charges of collection. The misconduct of the govern- 
ment in the matter of taxation, is proportionate to this excess of 
the payment above the receipt. 

A country heavily taxed may be considered in the same light 
as one labouring under natural impediments to production. With 
a heavy charge of production, it raises a very small product. 
Personal exertion, capital, and the productive agency of land, 
are all but poorly recompensed : and more is expended in earn- 
ing a less profit. 

It is worth while on this head to recur to the principles ex- 
plained in a former passage,* when describing the difference be- 
tween positive and relative dearness. High price resulting from 
taxation is positive dearness: it indicates a smaller product rais- 
ed by the efforts of a larger amount of productive agency. Be- 
sides which, taxation generally occasions a cotemporary advance 
of commodities in comparison with silver ; that is to say, raises 
their money price : and for this reason; because specie is not 
an annual, regenerative product, like those that are swallowed up 
by taxation. Government is not a consumer of specie, except 
when it happens to export it for the payment of its armies, or fo- 
reign subsidies : it refunds in the purchases it makes all the spe- 
cie it obtains by taxation: but the value levied is never refunded. f 
Wherefore, since taxation paralyzes one part of the sources of 
production, and effects the rapid destruction of the product of 
the other, when its ratio is excessive, it must gradually render 
products more scarce in proportion to the specie, which is not. 
varied in quantity by the operation. Now, whenever the com- 
modities to be circulated become fewer in proportion to the spe- 
cie that is to circulate them, their relative value to the specie 
must rise; the same money will purchase a smaller quantity of 
products. 

It might be supposed, that such a superabundance of gold and 
silver specie ought to operate in exoneration of the pubhc: yet 
it can not have that effect; for, however plentiful it may be in 
proportion to other commodities, still individuals can only obtain 
it by giving their own products in exchange; and the raising of 
those products has become more difficult and more costly. 

Besides, when money-prices grow high, and specie is conse- 

* Book II. chap. 3. 

t For the reason already stated, viz. that purchases, made with the pro- 
ceeds of taxation, are acts of exchange, and not of restitution. 



CHAP. VIII. ON CONSUMPTION. 437 

quently reduced in relative value, it gradually takes its departure, 
and becomes scarcer, like all other commodities; and thus a 
country, burthened with a taxation too heavy for its productive 
powers, is first drained of its commodities, and next of its specie; 
till it gradually reaches the extreme of penury' and depopulation. 

The careful study of these principles will give some insight 
into the mode, in which the annual and really monstrous expen- 
diture of national governments, in modern times, has habituated 
the subject to severer toil and exertion, without which it would 
be impossible that, after providing for the subsistence, comfort, 
and- pleasures of himself and family, according to the habits of 
the time and place, he should be able to meet the consumption 
of the state, and the collateral waste and destruction it occasions, 
the amount of which it is impossible to ascertain, though in the 
larger states it is confessedly enormous. 

This very profusion, though it proves the vices and defects of 
the political system and organization, has been attended with 
one advantage at any rate; viz., that it has operated to stimulate 
the approximation to perfection in the art of production, by obhg- 
ing mankind to turn the natural agents, to better account : in 
which point of view, taxation has certainly helped to develop and 
enlarge the human faculties: so that, when the progress of poli- 
tical science shall limit taxation to the supply of real public wants 
only, the improvements in the art of production will prove a vast 
accession to human happiness. But, should the abuses and com- 
plexity of the political system lead to the prevalence, extension, 
increase, and consolidation of oppressive and disproportionate 
taxation, it is much to be feared, that it may plunge again into 
barbarism those nations, whose productive powers are now the 
most astonishing: that the condition of the labouring classes, 
who are always the bulk of the community, may in such nations 
present a picture of drudgery so incessant and toilsome, as to 
make them cast a wistful eye upon the liberty of savage exist- 
ence ; which, though it offer no prospect of domestic comfort, at 
least promises emancipation from perpetual exertion to supply 
the prodigality of a public expenditure, yielding to them no satis- 
faction, and, perhaps, even operating to their prejudice, (a) 



(a) This ground of apprehension is certainly just. It has been doubted 
by many political theorists, whether the total remission of taxation would 
operate to improve the condition of the inferior productive classes : inas- 
much, as all that is now paid into the public exchequer, would quickly be 
appropriated by the classes, who should happ*en to be in possession of those 
sources and means of production, which are capable of exclusive appro- 
priation; and the owners of mere personal agency would nowise benefit. 
But it should be observed, that private persons have an immediate personal 
interest in making the most of their property; and will, on their own ac- 
count, so conduct themselves, as to promote their own advantage, which is 
the advantage of the public also, where equality of personal right prevails. 
Wherefore, the strorigest impulse of private cupidity can never operate to 



438 ON CONSUMPTION. book m. 

SECTION III. 

Of Taxation in Kind. 

Taxation in kind is the specific and immediate appropriation 
of a portion of the gross product to the public service. 

It has this advantage, of calHng on the producer only for what 
he has actually in hand, in the identical shape which it happens 
to be under. Belgium, after its conquest by France, found itself 
at times unable to pay its taxes, in spite of abundant crops ; the 
war, and the prohibition of exportation, obstructed the sale of its 
produce, which the government enforced by demanding payment 
in money; whereas, the taxes might have been collected without 
difficulty, had the government been content to take payment in 
kind. 

It has the further advantage of making it equally the interest 
of government and of the farmer to obtain plentiful crops, and 
improve the national agriculture. The levying of taxes in kind 
in China was probably the origin of the peculiar encouragement, 
bestowed by its government upon the agricultural branch of pro- 
duction. But, why favour one branch, when all are equally en- 
titled to protection, because all contribute to bear the public 
burthens? And, why has not government an equal interest in 
supporting the other branches, which it takes the trouble of ex- 
tinguishing ? 

It has likewise the advantage of excluding all exaction and in- 
justice in the collection; the individual, when he gathers in his 
harvest, knows exactly what he has to pay; and the state knows 
what it has to receive. 

This tax, which might appear at first sight to be of all others 
the most equitable, is, nevertheless, of all others the most in- 
equitable; for it makes no allowance for the advances made in 
the course of production, but is taken upon the gross, instead 
of the net, product. Take two farmers in different branches of 
cultivation; the one farming tillage-land of moderate quLaty; his 



retard the advance of productive power ajid national wealth, or to make 
them retrograde, but just the contrary. Thus, although the present con- 
dition of the mere labourer might not be improved, his means of bettering 
his condition would be enlarged, by the growing increase of wealth, &,nd by 
greater freedom of personal agency. . The extortion of private cupidity, 
unaided by authority, must, for its own sake, regulate itself by the ability 
of the object of it : but that of public authority is inexorable, and is restrain- 
ed by no consideration of immediate personal interest. Besides, personal 
suffering, occasioned by the hard-heartedncss of primate task-masters, is 
not so strong an incentive of odium against public authority, as where that 
authdrity is itself the ostensible task-master. T. 



CHAP. viir. ON CONSUMPTION. 439 

expenses of cultivation amounting, one year with another, say to 
800/r., and the gross product of his farm, say to 12,000/r., so 
as to yield him a net product of 4000 /r. only; the other farming 
pasturage or wood-land, yielding a gross product of precisely the 
same amount of 12,000 fr. ; with an expense of cultivation 
amounting, perhaps, to but 2000 /r. leaving him a net product, 
one year with another, of 10,000 /r. Suppose a tax in kind to 
be imposed, in the ratio of 1-12 of the annual product of land of 
all descriptions indiscriminately. The former will have to pay 
in sheaves of corn to amount of lOOO/r. : the latter will pay, in 
cattle or in wood, an fequal value of 1000 /r. What is the result? 
The one will have paid the fourth part of a net revenue of 4000 
fr.; the other but the tenth part of a net revenue of 10,000 /r. 

The revenue, that each person has for his own share, is the 
net residue only after replacing the capital he has embarked, 
whatever may be its amount. Is the gross amount of the sales 
he effects in the year the annual income of the merchanf? Cer- 
tainly not; all the income he gets is the surplus of his receipts 
above his advances; on this surplus alone can he pay taxes, 
without ruin to his concerns. 

The ecclesiastical tithe levied in France under the old system 
was liable to this inconvenience m part only. It attached nei- 
ther upon meadow, nor wood-land, nor kitchen ground, nor 
many other kinds of cultivation; and in some places was 1-18, in 
others 1-15 or 1-10 of the gross product; so that the real, was 
corrected by the apparent inequality. 

The marechal de Vauban, in his work entitled, Dixime Koyale, 
a book replete with just views, and well worth the study of those 
who nianage national finances, proposes a tax of 1-20 of the pro- 
duct of the land, which, in times of great emergency, might be 
raised to 1-10. But this proposition was made as a substitute 
for a still more inequitable system: namely, the saddling of the 
lands of the commonalty with the whole tax, and altogether ex- 
empting. the lands of the nobles and clergy. The public-spirited 
writer, who had occasion, in his character of engineer, to become 
personally acquainted with every part of France, speaks most 
feelingly of the hardships resulting from the land-tax (a) of those 
days. And there is no doubt, that the adoption of his plan at 
that time would have been a vast relief to the country. But it 
was disregarded. Why 1 Because every courtier had an interest 
to resist it: and this fine country was left to flounder through its 
distresses. The consequence was, a heavier loss of population 
from famine, than from the sword, in the war of the Spanish suc- 
cession. 



(a) Taille^ for the explanation of this tax, vide Wealth of Nations, book 
V. c. 2. art. 2. T. 



440 ON CONSUMPTION. book hi. 

The difficulty and expense of collection, together with the 
abuses to which it is liable, are another objection to taxation in 
kind. The immense number of agents must open a fine field 
for peculation. The government may be imposed upon, in re- 
spect to the amount collected, upon the subsequent sale and dis- 
posal, in respect to the quantity damaged, as well as in the 
charges of storing, preservation and carriage. If the tax be 
farmed to contractors, the profits and expenses of numberless 
farmers and contractors must all fall upon the public. The pro- 
secution of the farmers and contractors would require the active 
vigilance of administration. ' A gentleman of great fortune,' 
says Smith, ' who lived in the capital, would be in danger of suf- 
fering much by the neglect, and more by the fraud, of his factors 
and agents, if the rents of an estate in a distant province were to 
be paid to him in this manner. The loss of the sovereign, from 
the abuse and depredation of his tax-gatherers, would necessari- 
ly be much greater.'* . 

Various other objections have been urged against taxation in 
kind, which it would be useless and tedious to enumerate. I shall 
only take the liberty pf remarking the violent operation upon re- 
lative price, which must follow from so vast' a quantity of produce 
being thrown upon the market by the agents of the public reve- 
nue, who are notoriously equally improvident as buyers and as 
sellers. The necessity of clearing the storehouses to make room 
for the fresh crop, and the ever urgent demands upon the public 
purse, would oblige them to sell below the level, to which the 
price would naturally be brought by the rent of the land, the 
wages of labour, and the interest of the capital, engaged in agri- 
culture; and private dealers would be unable to maintain the 
competition. Such taxation not only takes from the cultivator 
a portion of his product, but prevents "his turning the residue to 
good account. 



SECTION IV. 

Of the Territorial or Land-Tax of England. 

In the year 1692, which was four years after the happy revo- 
lution, that placed the prince of Orange upon the British throne, 
a general valuation was made of the income of all the land in the 
country ; and, upon that valuation the land-tax continues to be 
levied to this day; so that the tax of four shillings in the pound, 
upon the rents of land, is a fifth of its rent in 1692, and not of 
the actual rent at the present day. 

It may easily be conceived how much this tax must operate to 

» Wealth of Nations, book v. c. 2, art, 1. 



CHAP. viir. ON CONSUMPTION. 44L 

encourage improvements of the land. An estate, that has been 
improved so as to double the rent, does not pay double the ori- 
ginal tax ; neither does it pay a less tax if it be suffered to fall 
into neglect and impoverishment ; thus, it operates as a penalty 
upon negligence. / 

To this fixation of the tax, many writers attribute the high 
state of the cultivation of the land in England: and doubtless it 
may have done much to promote improvement. But, what 
v^'ould be thought of a government that should say to a trades- 
man in a small way of business, " You are trading in a small 
way upon a small capital, and consequently pay very little in di- 
rect taxes. Borrow, and enlarge your capital, extend your deal- 
ings, and increase your profits as much as you can, and we will 
not charge you with any increase of taxes. Nay, further, when 
your heirs succeed to the business, and have still further extend- 
ed it, they shall be assessed at precisely the same rate, and shall 
continue subject to the same taxes only." All this might be a 
vast encouragement to trade and manufacture; but would there 
be any equity in such a proceeding? and might they not advance 
without such assistance] Has not England herself presented 
the example of a still more rapid improvement in commercial 
and manufacturing industry, without any such unjust partiality? 
A land-owner, by attention, economy, and intelligence, improves 
his annual income to tha amount, say of 5000 /r.; if the state 
clairn a fifth of this advance, there will still be a bonus of 4000 
fr. to stimulate and reward his exertions. 

It would be easy to puf cases, in which the tax, becoming by 
its fixation disproportionate to the means of the tax-payers and 
the condition of the soil, might be productive of as much rnis- 
chief, as it has done good in other instances : where it would 
operate to throw out of cultivation a class of land, that, by one 
cause or other, had become incompetent to pay the same ratio of 
taxation. We have seen an example of this in Tuscany. There, 
a census or terrier was made in 1496, wherein the plains and 
vallies, were rated very low, on account of the frequent floods 
and inundations, which prevented any regular and profitable cul- 
tivation : while the uplands, that were then the only cultivated 
spots, were rated very high. Since then, the torrents and inun- 
dations have been confined by drainage and embankment, and 
the plains reduced to fertility; their produce being comparatively 
exempt from tax, came to market cheaper than that of the up- 
lands, which, consequently, were unable to maintain the compe- 
tition, under the pressure of disproportionate taxation, and have 
gradually been abandoned and deserted.* Whereas, had the 
tax been adjusted to the change of circumstances, both might 
have been cultivated together. 

* Forbonnois, Principes et Observ. &c. torn. ii. p. 247. 
64 



442 ON CONSUMPTION. book in. 

In speaking of a tax, peculiar to a pfirticular nation, I have 
used it merely in illustration of general and universal principles. 



or NATIONAL DEBT. 



SECTION I. 



Of the Contracting Debt by JYational AutJiority, and of its gene- 
ral Effect. 

There is this grand distinction between an individual borrow- 
er arid a borrowing government, that, in general, the former bor- 
rows capital for the purpose of beneficial- employment, the latter 
for the purpose of barren consumption and expenditure. A na- 
tion borrows, either to satisfy an unlooked-for demand, or to 
meet an extraordinary emergency; to which ends, the loan may 
prove effectual or ineffectual: but, in either case, the whole sum 
borrowed is so much value consumed and lost, and the public re- 
venue remains burthen.ed with the interest upon it. 

Melon maintains, that national debt is no more than a debt 
from tlie right hand to the left, which nowise enfeebles the body 
politic. But he is mistaken; the state is enfeebled, inasmuch 
as the capital lent to its government, having been destroyed in 
the consumption of it by the government, can no longer yield any 
body the profit, or in other words, the interest, it might earn, in 
the character of a productive means. Wherewith, then, is the 
government to pay the interest of its debt? Why, with a portion 
of the revenue arising from some other source, which it must 
transfer from the tax-payer' to the public creditor for the purpose. 

Before the act of borrowing, there will have been in existence 
two productive capitals, each of them yielding, or capable of 
yielding, revenue; that is to say, a capital about to be lent to go- 
vernment, and a capital whereon the future tax-payers derive that 
revenue, which is about to be applied in satisfaction of the inte- 
rest upon the capital lent. After the act of borrowing, there will 
remain but one of these capitals; viz., the latter of the two, 
whereof the revenue is thenceforward no longer at the disposal 
of its former possessors, the present tax-payers, since it must be 
taken in some form of taxation or other by the government, for 
the sake of providing the payment of interest to its creditors. 
The lender loses no part of his revenue : the only loser is the 
payer of taxes. 



CHAP. IX. ON CONSUMPTION. 443 

People are apt to suppose, that, because national loans do not 
necessarily occasion any diminuliori of the national money or 
specie, therefore, they occasion, not a loss but merely a transfer, 
of national wealth. With a view to the more ready exposure of 
this fallacy, I have subjoined a synoptical table, showing what 
becomes of the sum borrowed^ and whence the public credi- 
tor's interest is satisfied.* 

When a government borrows, it either does or does not eingage 
to repay the principal. In the latter case it grants what is called, 
a perpetual annuity. Redeemable loans are capable of infinite 
variety in the terms. The principal is contracted to be repaid, 
sometimes gradually, and in the way of lottery ; sometimes by 
instalments payable together with the interest, sometimes in 
the way of increased interest, with condition to expire on the 
death of the- lender; as in the case of tontines and life-an- 
nuities, whereof the latter determine on the death of the indivi- 
dual lender; whereas, in tontines, the full interest continues to be 
divided amongst the survivors, until the whole of the lives have 
expired. ■ 

Tontines and life-annuities are very improvident modes of bor- 
rowing ; for the borrower remains , throughout liable to the full 
rate of interest, although he annually repays a part of the princi- 
pal. Besides, they savour of imrnorality ; ofiering a premium to 
egotism, and a stimulus to the dilapidation of capital, by enabling 
the lender to consume both principal and interest, without fear of 
personal beggary. 

The government best acquainted with the business of borrow- 
ing and lending have not, of late years at least, given any en- 
gagemerii to repay the principal of the loan. Thus, public cre- 
ditors have no other way of altering the investment of their capital, 
except by selling their transferable security, which they can do 
with rnore or less advantage to themselves, according to the buy- 
er's opinion of the solidity of the debtor-g-overnment, that has 
granted t^e perpetual annuity. f Despotic governments have 
always found a great difficulty in negotiating such loans. W^here 
the sovereign is powerful enough to violate his contracts at plea- 
sure, or where there is a mere personal contract with the reign- 
ing monarch, with a risk of disavowal by the- sticcessor, lenders 
are loth to advance their money, without a near and definite pe- 
riod of repayment. ^ 

The appointment to posts aiid offices, under condition of an 
annual payment, or of deposite for which the government en- 
gages to pay interest, is a mode of borrowing ia. perpetuity, in 
which the loan is compulsory. When once this paltry expedient 

^ * Vide App. A . , . ' . 

i tin the next sectinn it/will ye explained /how .-.lu Uiiji^.iovj^.idbla' debt inay 
be extinguished by piircjiase at the market-price." ,■ ' ■'.,.. 



444 ON CONSUMPTION. book in. 

is resorted to, it requires very little ingenuity to find plausible 
grounds, for converting almost every occupation, down to the 
dust-man and street-porter, into patent and saleable offices. 

Another mode of borrowing is, by the anticipation of revenue; 
by which is meant, the assignment by a government of revenues 
not yet due, with allowance in the nature of discount, the taking 
up money in advance from lenders, who charge a discount pro- 
portionate to the risk they run from the instability of the govern- 
ment and possible deficiency of the revenue. Engagements of 
this kind, contracted by a-governmert, and satisfied either out of 
the revenue when collected, or by the issue of fresh bills upon 
the public treasury, constitute what bears the uncouth English 
denomination oi^ floating debt : the consolidated debt being that, 
whereon the creditor can demand the interest only, and not the 
principal. 

National loans of every kind are attended with- the univers^al 
disadvantage, of withdrawing capital from productive employr 
ment, and diverting it to the channel of barrea consumption; and,- 
in countries where the credit of the government is at a low ebb, 
with the further and particular disadvantage, of raising the inte- 
rest of capital. Who can be expected to lend at 6 per cent, to 
the farmer, the manufacturer, or the merchant, while he can rea- 
dily get an offer of 7 or 8 per cent, from the government? That 
class of revenue, which has been called, profit of capital, is 
thereby advanced in its ratio, at the expense of the consumer : 
the consumption falls off, in consequence of the advance in the 
real price of products; the productive agency of the other sources 
of production are less in demand, and, consequently, worse paid ; 
and the whole community is the sufferer, with the sole exception 
of the capitaHst. 

The ability to borrow affords one main advantage to the state; 
viz. the power of apportioning the burthen entailed by a sudden 
emergency among a great number of successive years. In the 
present state of public affairs, and on the present scale of inter- 
national warfare, no country could support the enormous expense 
from its ordinary annual revenue. The larger states . pay in 
taxation nearly as much as they are able ; for economy is by 
no means the order of the day with them; and their ordinary 
expenditure seldom falls much short of the income. If the ex- 
penditure must be doubled to save the nation from ruin, borrow- 
ing is usually the only resource ; unless it can make up its mind to 
violate all subsisting engagements, and be guilty of spoliation of 
its own subjects and foreigners too. The faculty of borrowing 
is a more powerful agent, than even gunpowder; but probably the 
gross abuse, that is made of it, will soon destroy its efficacy. 

Great pains have been taken, to find in the system of borrow- 
ing, asVwell as in taxation, some inherent advantage, beyond that 



CHAP. IX. ON CONSUMPTION. 446 

of supplying the public consumption. But a close examination will 
expose the hopelessness of such an attempt. 
.- It has been maintained, for instance, that the debentures and 
securities, which form a national debt, become real and substan- 
tial values existing within the community ; that the capital, of 
which they are the evidence or representative, is so much posi- 
tive wealth, and must be reckoned as an item of the total sub- 
stance of the nation.* But it is not so; a written contract or se- 
curity is a mere evidence, that such or such property belongs to 
such an individual. But wealth consists in the property itself, 
and not in the parchment, by which sits ownership is evidenced; 
therefore a fortiori, a. security is not even an evidence of wealth, 
where it does not represent an actual existing value, and when it 
operates a? a mere power of attorney from the government to its 
creditor, enabling him to receive annually a specified portion of 
the revenue expected to be levied upon the tax-payers at large. 
Supposing the security to be cancelled, as it might be' by a na- 
tional bankrupt<;y, would there be any the least diminution of 
wealth in the corhmunity'? Undoubtedly not. The only difference 
would be, that the revenue, which before went to the public cre- 
ditor, would now be at the disposal of the tax-payer, from whona 
it used to be taken. 

Those who tell us, that the annual circulation is increased by 
the whole amount of the annual disbursements of the govern- 
ment, "f forget that these disbursements are made out of the an- 
nual products, and are a portion of the annual revenue, taken 
from the tax-payer, which would have been brought into the ge- 
neral circulation just the same, although no such thing as nation- 
al debt had existed. The tax-payer would have spent what is 
now spent by the public creditor ; that is all. 

The sale or purchase of debentures or securities is not a pro- 
ductive circulation, but a mere substitution of one public creditor 
in place of another. When these transfers degenerate into stock- 
jobbing, that is to say, the making of a profit by the rise and fall 
of their price, they are productive of much mischief; in the first 
place, by the unproductive employment on this object of the 
agent of circulation, money, which is an item of the national ca- 
pital ; and, in the next, by procuring a gain to one person by the 
loss of another ; which is the characteristic of all gaming. The 
occupation of the stock-jobber yields no new or useful product; 
consequently, having no product of his own to give in exchange, 

* Considerations surles Avantages de V Existence d'une Dette putlique,p. 8. 

tTlie transferable nature of these securities does not invest them with 
- the properties of money, since tliey do not act in that capacity. But the 
use of convertible paper, as money, operates to create a positive addition 
to the total national capital; because, but for their agency in the transfer of . 
value in general, it must be executed by specie, or some equally substan- 
tial item of capital. Government debentures of stock require money to cir- 
culate them, instead of acting themselves as money. ^ 



446 ON CONSUMPTION. book m. 

he has no revenue to subsist upon, but what he contrives to make 
out of the unskilfulness or ill-fortune of gamesters like himself, (a) 

A national debt has been said to bind the public creditors more 
firmly to the government, and make them its natural supporters 
by a sense of common interest; and so it does beyond all doubt. 
But, as this common interest may attach equally to a bad or a 
good government, there is just as much chance of its being an. 
injury as a benefit to a nation. If we look at England, we shall 
see a vast number of well-meaning persons, induced by this mo- 
tive to uphold the abuses and rtiisgovernment of a wretched ad- 
ministration. 

It has been further urged, that a national debt is an index of 
the public opinion, respecting the degree of credit which the go- 
vernment deserves, and operates as a motive to its gogd conduct 
and endeavours to preserve the public opinion, of which such a 
debt furnishes the index. This can not be admitted without some 
qualification. The good conduct of government, in the eyes of 
the public creditors, consists in the regular payment of their own 
dividends; but, in the eyes of the tax-payers, it consists in spend- 
ing as little as possible. The market-price of stock does, indeed, 
furnish a tolerable index of the former kind of good conduct, but 
not of the latter. Perhaps it would be no exaggeration to say, 
that the punctual payments of the dividends, instead of being a 
sign of good, is in numberless instances a cloak to bad, govern- 
ment ; and, in some countries, a boon for the toleration of fre- 
quent and glaring abuses. 

Another argument in favour of national debt is, that it affords 
a prompt investment to capital, which can find no ready and pro- 
fitable employment, and thus must at any rate, prevent its emi- 
gration. If it do, so much the worse: it is a bait to tempt capital 
towards its destruction, leaving the nation burthened with the an- 
nual interest, which government must provide- It is far better 
that the capitaK should emigrate, as it would probably return 
sooner or later ; and then its interest for the mean time will be 
chargeable to foreigners. A national debt of moderate amount, 
the capital of which should have been well and judiciously ex- 
pended in useful works, .might indeed be atterixied with the ad- 
vantage of providing an investment for minute portions of capital, 
in the hands of persons incapable of turning them to account, who 
would probably keep them locked up, or spend them by driblets, 
but for the convenience of such an investment. This is perhaps 
the sole benefit of a national debt ; and even this is attended with 
some danger; inasmuch as it enables a government to squander 
the national savings. For, unless the principal be spent upon 
objects of permanent public benefit, as on roads, canals, or the 



(a) The distinction between the stock-jobber and the stock-broker is too 
obvious to need an explanation. T. 



CHAP. IX. ON CONSUMPTION. 447 

like, it were better for the public, that the capital should remain 
inactive, or concealed ; since, if the public lost the use of it, at 
least it would not have to pay the interest. 

Thus, it may be expedient to borrow,, 'when capital must be 
spent by a government, having nothing but the usufruct at its 
command; but we are not to imagine, that, by the act of borrow- 
ing, the public prosperity can be advanced. Tlie borrower, 
whether a soverign, or an individual, incurs an annual charge 
upon his revenue, besides impoverishing himself to the full 
amount of the principal, if it be consumed ; and nations never 
borrow but with a view to consume outright. 



SECTION II. 

Of public Credit, ils Basis, and the Circumstances that endanger 
its Solidity. 

Public credit is the confidence of individuals in the engage- 
ments of the ruling power, or government. This credit is at the 
extreme point of elevation, when the public creditor gets no 
highesr interest, than he would by lending on the best private 
securities ; which is a clear proof, that the lenders require no 
premium of insurance to cover the extra risk they incur, and that 
in their estimation there is no such extra risk. Public credit never 
reaches this elevation, except where the government is so consti- 
tuted, as to find great difficulty in breaking its engagements, and 
where, moreover, its resources are known to be equal to its 
wants ; for which latter reason, public credit is never very high, 
unless where the financial accounts of the nation are subject to 
general publicity. 

Where the pubhc authority is vested in a single individual^ it 
is next to impossible, that public credit should be very extensive ; 
for there isno security, beyond the pleasure and good faith of 
the monarch. When the authority resides in the people, or its 
representatives, there is the further security of a personal inter- 
est in the people themselves, who are creditors in their individu- 
al, and debtors in their aggregate, character; and therefore, can 
not receive in the former, without paying in the latter. This 
circumstance alone would lead us to presume, that now, when 
great undertakings are so costly as to be effected by borrowing 
alone, representative governments will acquire a marked prepon- 
derance in the scale of national power, simply on account of their 
superior financial resources, without reference to any other cir- 
cumstance. 

In one light, the obligations of, government inspire more con- 
fidence than those of individuals, that is to say, by the greater 
solidity of its resources. The resources of the most responsi- 



448 ON CONSUMPTION. book hi. 

ble individual may fail suddenly and totally, or at least to such 
an extent, as to disable him from performing his engagements. , 

Numerous commercial failures, political or natural calamities, 
litigation, fraud or violence, may ruin him entirely ; but the sup- 
plies of a government are derived from such various quarters, 
that the individual calamities of its subjects can operate but par- 
tially upon the revenue of the state. There is also another 
thing, that facilitates the borrowing of government even more 
than the credit it is fairly entitled to ; and that is, the great fa- 
cility of tranfer presented to the stockholder. Public creditors 
always reckon upon the possibihty of withdrawing by the sale of 
their debentures, before the occurrence of embarrassment or 
bankruptcy ; and, even where they contemplate such a risk, gen- 
erally consider some advance of the rate of interest a sufficient 
premium of insurance against it. 

Moreover, it is observable, that the sentiments of lenders and 
indeed of mankind upon all occasions, are more powerfully ope- 
rated upon by the impressions of the moment, than by any other 
motive ; experience of the past must be very recent, and the 
prospect of the future very near, to have any sensible effect. 
The monstrous breach of faith on the part of the French go- 
vernment in 1721, in regard to its paper money and the Missis- 
sippi shareholders, did not prevent the ready negotiation of a 
loan of 200,000,000 liv. in 1759 ; nor did the bankrupt measures 
of the Abbe Terrai in 1772, prevent the negotiation of fresh 
loans in 1778 and every subsequent year. 

In other points of view, the credit of individuals is better found- 
ed than that of the government. There is no compulsory pro- 
cess against the latter, for the breach of its engagements; nor 
do governments ever husband the national resources with nearly 
the care and attention of individuals. Besides, in the event .of 
external or internal subversion, individuals may withdraw their 
property from the wreck much better than governments can. . 

Public credit affords such facilities to public prodigality, that 
many political writers have regarded it as fatal to national pros- 
perity. For, say they, when governments feel themselves strong 
in the ability to borrow, they are too apt to intermeddle in every 
political arrangement, and to conceive gigantic projects, that 
lead sometimes to disgrace, sometimes to glory, but always to a 
state of financial exhaustion; to make war themselves, and stir 
up others to do the like; to subsidize every mercenary agent, and 
deal in the blood and the consciences of mankind ; making capi- 
tal, which should be the fruit of industry and virtue, the prize 
of ambition, pride, and wickedness. 

A nation, which has the power to borrow, and yet is in a state 
of political feebleness, will be exposed to the requisitions of its 
more powerful neighbours. It must subsidize them in its defence ; 
must purchase peace; must pay for the toleration of its inde- 



CHAP. IX. ON CONSUMPTION. 449 

pendence, which it generally loses after all; or perhaps must 
lend, with the certain prospect of never being repaid. 

These are by no means hypothetical cases : but the reader is 
left to make the application himself. 

By the establishment of sinking-funds, well ordered govern- 
ments have found means to extinguish and discharge their unre- 
deemable debt. The constant operation of this contrivance con- 
tributes more than any thing else to the consolidation of public 
credit. The mode of proceeding is simply this : 

Suppose that the state borrows 100 millions, at an interest of 
5 per cent. : to pay that interest, it must appropriate a portion of 
the national revenue to the amount of 5 millions. For this pur- 
pose, it usually imposes a tax calculated to produce this sum an- 
nually. If the tax be made to produce somewhat more, say 
5,462,400 fr., and the surplus of 462,400 /r. be thrown into a 
particular fund, and laid out annually, in the purchase of govern- 
ment debentures to that amount in the market, and if, moreover, 
in addition to this surplus, the interest likewise upon the debt 
thus extinguished, be annually employed in such purcTiases, the 
whole principal debt will be extinguished at the end of fifty years. 
This is the mode in which a sinking-fund operates. The efficacy 
of this expedient depends upon the progressive power of com- 
pound interest; that is to say, the gradual augmentation of the 
interest of capital, by the addition of interest upon the arrears of 
interest, reckoned from certain stated rests. 

It is obvious, that, by an annual instalment of not more than 10 
per cent, upon its own interest, the principal of a debt bearing 
an interest of 5 per cent, may be extinguished in less than 50 
years. However, the sale of the debentures being voluntary, if 
the holders will not sell at par, that is to say, at 20 years' pur- 
chase, the redemption, in this way, will take somewhat longer 
time; but this very state of the market will be a convincing 
proof of the high ratio of national credit. On the other hand, if 
the credit decline, so that the same sum will purchase a larger 
amount of debentures, the extinction of the debt will be effected 
in a shorter period. So that the lower public credit falls, the 
^more powerful is the operation of a sinking-fund to revive it ; 
and that fund grows less efficient, exactly in proportion as it be- 
comes less requisite. 

To the establishment of such a fund, has the long-continued 
public credit of Great Britain been attributed, and her ability still 
to go on borrowing, in spite of a present debt of more than 19 
milliards of our money* And doubtless this it is, that has 

* Vansittart, the chancellor of the exchequer in England, in a speech 
delivered in parliament, in the month of February, 1815, states it at 650 
millions sterling only, which is but from 15 to 16 milliards: but this esti- 

65 



450 ON CONSUMPTION. book hi. 

made Smith declare sinking-funds, which were contrived ex- 
pressly to reduce national debt, the main instruments of their in- 
crease. Had not governments the happy knack of abusing 
resources of every kind, they would soon grow too rich and 
powerful. 

A sinking-fund is a complete delusion, whenever a government 
continues borrowing on one hand, as much as it redeems on the 
other; and, a fortiori, when it borrows more than it redeems, as 
England has constantly done, since the year 1793 to the present 
time. Whencesoever the amount of the sinking-fund be derived, 
whether it be merely the product of a fresh tax, or that product, 
augmented by the interest on the extinguished debt, if the go- 
vernment borrow a million for every million of debt that it pays 
off, it creates an annual charge of precisely the same amount as 
that extinguished: it is precisely the same thing, as lending to it- 
self the million devoted to th'e purpose of redemption. Indeed, 
the latter course would save the expense of the operation. This 
position has been fully established in an excellent work, by pro- 
fessor Hamilton,* which is quite conclusive upon the subject. 
The enormous burthens of the people of England, the scanda- 
lous abuse its government has made of the power of borrowing, 
and her substitution of paper-money in place of specie, will have 
produced some benefit at least; inasmuch as they have assisted 
the solution of many problems, highly interesting to the happi- 
ness of nations, and given warning to all future generations, to 
beware of the like excesses. 

It must be evident, that the grand requisite to the efficiency 
of a sinking-fund is, the punctual and inviolable application of 
the sums appropriated to the purpose of redemption. Yet this 
has never been rigidly adhered to, even in England, where con- 
sistency and good faith to the creditors are a point of honour 
with the government. So that English writers put no faith in 
the extinction of the debt by the operation of the sinking-fund: 
nay, Smith makes no scruple of declaring, that national debts 
have never been extinguished except by national bankruptcy. 

It has been sometimes a matter of speculation, to inquire into 
the effect of a national bankruptcy upon the relative condition of 
individuals, and the internal economy of the nation. In ordina- 
ry cases, when a government commits an act of bankruptcy, it 
adds to the revenues of the tax-payers the whole amount that it 
discontinues paying to the public creditors. — Nay, it goes some- 
what further: for it remits likewise the charges of collection 
and management of the revenue and the debt. A nation bur- 
thened with 100 millions of annual interest on its debt, whereon 

mate is taken at the loan, and not at the redemption price. Vide de I'An- 
gleterre, et des Anglais, par J. B. Say, Paris, 1816. 3d edit. p. 13. 
* On tlie National Debt of Great Britain. 8vo. Edinburgh, 1813. 



CHAP. IX. ON CONSUMPTION. 451 

the charges above mentioned should amount to 30 per cent.* 
more, might by a bankruptcy remit to the tax-payers 130 milHons, 
while it stript its creditors of 100 millions only. 

In England, the effect would be more complicated ; because 
she does not pay the dividends on her debt wholly out of the an- 
nual proceeds of taxation ; at least, not at the moment of my 
writing; but annually borrows a sum nearly equal to the interest 
of her debt.f Were she to commit an act of bankruptcy, the 
annual loans of 40 millions sterling, more or less, would be with- 
drawn from unproductive consumption by the public creditors, 
and be applicable to the purposes of reproductive consumption: 
for it may fairly be supposed, that the capitalists who accumulate 
and lend to the state, would look out for some profitable invest- 
ment. In this point of view, the operation would tend vastly to 
the increase of the national capital and revenue : but the execu- 
tion would be attended with very disastrous immediate conse- 
quences : for this annual amount of 40 millions would be with- 
drawn from a class of consumers, who have no other means of 
subsistence, and would be utterly unable to make good their los- 
ses in any other way, for want both of personal industry, and of 
the command of capital. 

A bankruptcy would probably obviate the necessity of fresh 
loans : but would not release an atom of the former taxation, 
where the interest of the debt is habitually paid, not with the 
proceeds of taxation, but with new loans. Thus, the burthens 
of the people would not be alleviated, J nor the charges of pro- 
duction reduced : consequently, there would be no sensible re- 
duction in the price of commodities ; nor would British products 
find a readier market either at home or abroad. 

The classes liable to taxation would be diminished in numeri- 
cal strength by the whole of the suppressed stockholders ; and 
taxation less productive, although not lowered in the ratio. The 
40 millions of revenue, withdrawn from the public creditors, 
would pay taxes only upon the annual profit or revenue, they 
might yield in the character of productive capital, (a) The ruin 

* In England and the United States they are not nearly so high in propor= 
tion : but the ratio is even higher in some states that shall be nameless. 

t Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. 
London, 1814. Stokes, Revenue and Expenditure of Great Britain, Lon- 
don, 1815. Should a continuance of peace enable her to square her in- 
come with her annual expenditure, inclusive of the interest on her debt, it 
would still afford no relief, but merely arrest the further progress of the 
evil. 

t Economy in the national expenditure is the only thing that can miti- 
gate the pressure of taxation upon the British nation ; yet, were economy 
enforced, how is that system of corruption to be upheld, through which the 
interest of the minister of the day regularly prevails over that of the nation? 



(a) That is to say, upon nearly the whole amount ; for the whole must 
cither be consumed unproductively by the ci-devant lenders^ or embarked 



452 ON CONSUMPTION. book in. 

of the public creditors would be attended with abundance of col- 
lateral distress; with private failures and insolvency without end; 
with the loss of employment to all their tradesmen and servants, 
and the utter destitution of all their dependents. 

On the other hand, if she persevere in borrowing to pay the 
interests of former loans, that interest, and with it taxation also, 
must go on increasing to infinity. It is impossible to avoid a 
precipice, when one follows a road that leads nowhere else. (a) 

The potentates of Asia, and all sovereigns, who have no hopes 
of establishing a credit, have recourse to the accumulation of 
treasure. Treasure is the reserve of past, whereas a loan is the 
anticipation of future, revenue. They are both serviceable ex- 
pedients in case of emergency. 

A treasure does not always contribute to the political security 
of its possessors. It rather invites attack, and very seldom is 
faithfully applied to the purpose for which it was destined. The 
accumulation of Charles V. of France fell into the hands of his 
brother, the duke of Anjou ; those which pope Paul II. destined 
to oppose the Turkish arms, and drive them out of Europe, sup- 
plied the extravagancies of Sixtus IV., and his nephews. The 
treasures amassed by Henry IV., for the humiliation of the house 
of Austria, were lavished upon the favourites of the queen-mo- 

in productive enterprises ; in which latter case, it will go almost wholly 
towards the revenue of human agency, in all those countries, where the 
appropriated natural agents are already wholly appropriated Thus, in a 
financial point of view it is of little immediate consequence, whether the 
sum be borrowed and expended by the state or by its creditors ; for it is 
sure to go almost wholly to the formation of private and taxable revenue. 
Nay, its payment to the creditors is probably the destination, that will, of 
all others, least expose it to indirect taxation ; for stockholders are com- 
monly amongst the most frugal of the members of a community ; and. it is 
notoriously to them that the government looks for a very considerable part 
of the loans it may have occasion to negotiate ; and herein theory is confound- 
ed by experience. The cessation of loans in Great Britain, consequent up- 
on the reduction of 40 millions of expenditure, has made little reduction in 
the proceeds of indirect taxation. But the remote consequence will be 
widely different. If the sum be unproductively expended, it will nowise 
expand the national productive power, yet leave that power burthened with 
its future interest; if expended productively, it will expand pi-oductive 
power, and entail no additional pressure upon its elasticity. T. 

(a) The momentous question of national bankruptcy is treated by our 
author with much less attention than it deserves. He has told us neither 
in what cases it is just, nor in what cases it is necessary, nor by what means 
it can be effected, with the smallest degree of individual hardship, and na- 
tional confusion and embarrassment. It must be obvious, that it may be 
either partial or total, sudden or gradual; and that there is a variety of ways 
of effecting it, whereof some must be far less objectionable than others; ^s 
for instance, by extinction of principal, or by tlie sponge, as it is termed ; 
by extinction or reduction of interest only; b^r lowering the weight or qua- 
lity of a national metallic-money; by depreciating a national paper-money 
by its excessive issue ; by taxation of principal or of interest of the debt, 
&c. &c.: all which expedients it would be impossible to canvass in the nar- 
row limits of a note. T. 



CHAP. IX. ON CONSUMPTION. 453 

ther ; and, at a later period, we have seen the political power of 
Prussia brought into imminent hazard by those very savings, 
which were destined by Frederick III. to its consolidation. 

The command of a large sum is a dangerous temptation to a 
national administration. Though accumulated at their expense, 
the people rarely, if ever, profit by it : yet in point of fact, all 
value, and consequently, all wealth, originates with the people. 



454 



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